The Australian Securities and Investments Commission’s (ASIC) report on the life insurance advice industry is flawed, according to Synchron Chairman Michael Harrison.

He told the Parliamentary Joint Committee on Corporations and Financial Services’ industry hearing the report is selective on what constitutes bad advice.

“In the ASIC report, when you actually stripped away what was bad advice versus what was a technical error of some sort, the bad advice section was very low,” he said.

“I know, in our own case, 42 of our advisers were reviewed in that ASIC report, and there were two of them who had actually given bad advice. One of them we had already got rid of when the report came out, because we had discovered it ourselves.”

He says the 37% figure for bad advice encompasses “virtually everything that had the Ts not crossed and the Is not dotted. If you really dig down, you will find that the bad advice component of that was much lower.

“I know what ASIC said, and I have had this debate with ASIC, but the fact is, just using our own examples, there was nowhere near 37% bad advice.” 

Bombora Advice authorised representative Antoinette Handley told the hearing there are problems with the sample.

“It was 37% of a number of files that were supposed to be representative,” she said. “They actually targeted particular characteristics in advisers.

“They were looking for high upfront commission and a high lapse rate – no explanation for why a high lapse rate was correlated to bad advice. So they were looking at a very particular set of behaviours, and then they found 37% of those in fact failed to meet the requirements of the law – not necessarily poor advice, but ‘failed to meet the requirements of the law’.”

Ms Handley says the report lacks transparency. She says ASIC did not examine whether replacement policies were warranted or not – just that they were replaced, therefore they must have been churned.

“Our issue with [the ASIC report] is it purports to be about quality of advice. It is actually about trying to investigate churn. But instead of actually doing that, they went partway down the path and did not do it properly.”

Ms Handley says ASIC should have defined churn and applied this to the advice being investigated.

“[ASIC is] saying 37% of all advice is bad,” she said. “[Finance Minister] Kelly O’Dwyer says it all the time.

“It is so patently not correct if you put it back to the absolute facts of the ASIC report.”