The Financial Services Council (FSC) will talk to the life insurance industry on developing a policy to stop churning, but industry sources say it is not a major problem.

ClearView Wealth Chief Actuary Greg Martin says its business is not churned.

“I don’t think churn is a big driver of lapse rates,” he told the FSC Life Insurance Conference last week.

“I don’t think it is a big problem in the industry even with average lapse rates at about 15%.”

AIA Australia Chief Distribution Officer Damien Mu also agreed it was not a major problem for the life industry.

“Our experience is that a small group of advisers are churning, but we don’t think it is large problem,” he told the conference.

“Advisers do move business where it is in the customers’ best interest and that should continue to happen.”

But Mr Mu did agree it was better for the industry to self-regulate rather than rely on government to bring in legislation.

Mr Martin says educating government that churning is not a big issue would be another positive step.

FSC draft policy on churning will see only level commission will apply to replacement business that is written within five years.

It also proposes a consistent adviser responsibility period of two years with 100% commission clawback if the policy lapses within one year and 50% clawback in the second year.

FSC CEO John Brogden says addressing churn is in the interest of consumers and supports financial advice as a profession.

“The clear aim of this policy is to support the statutory requirements for advisers to act in the client’s best interest, improve the affordability of premiums for consumers and improve trust in the life insurance industry and the advice profession,” he said.

“These measures are not intended to limit or prohibit alternative payment structures that may exist for retail life insurance advice including fee-for-service models.”

The FSC plans to implement a framework to address churn by July 1 next year.