The head of a specialist life insurance dealer group has attacked the Financial Services Council’s (FSC) “churning” initiative.

Synchron Director Don Trapnell says the FSC move “defames” advisers while protecting the role of life insurance companies.

“It is highly contentious at best, and a blanket defamation of advisers at worst, to label as ‘churning’ the legitimate process of moving a client from one product to another after discovering a better alternative,” he said.

“If a client’s best financial interests are served in moving them from one company or product to another, the advisers are acting in accordance with both the letter and the spirit of the current and proposed legislation.”

Mr Trapnell told insuranceNEWS.com.au his company has 200 advisers of whom 80% specialise in life insurance.

“When a life company undertook an analysis of the lapse rates of those 80%, it found two advisers had a number of lapses beyond 13 months,” he said. “One adviser, who writes 100 polices a year, had four cases.”

Mr Trapnell says life insurance companies lump all lapse cases together regardless of how long the policy has been active.

“If an adviser has legacy business, he is going to have more lapse rates,” he said.

“If the policy has been in existence for 20 years and allowed to lapse, it has done its job of protecting the insured.”

Mr Trapnell says it is particularly abhorrent to see organisations such as the FSC, which counts the major life insurers as members, jumping on the anti-adviser bandwagon.

“Life insurance companies are continuously working to improve products, as they should be,” he said. 

“When companies develop better products, they expect it to result in substantial new business – that is the very reason they do it.”

He says the best interest proposals in the draft Future of Financial Advice bill say the adviser has a fiduciary duty to the client.

“If I had a client with a five-year policy and a new insurer offered better conditions for less premium, should I tell the client what is being offered and move them,” he said.

“If I do, I am labelled a churner.”

Mr Trapnell says the life companies are happy to see inflows “but cry foul when there are outflows”.

“I believe the FSC is attempting to camouflage the essential role life insurance companies play in the process by encouraging the use of the term ‘churning’ and laying the blame for it on advisers,” he said.

“This has resulted in more backlash against advisers who are, once again, being unfairly labelled the blackguards of the entire industry.”