The Financial Services Council’s (FSC) new Life Insurance Approved Product List (APL) standard will not apply to platforms and non-institutionally owned dealer groups, because they are not part of the organisation.

But it will apply to Australian financial services licence-holders who are members of the FSC.

Obviously, dealer groups and advisers who are members of advice associations are not members of the FSC, so it will not apply to them.

There is also a growing trend for advisers to use platforms to process life insurance applications, but most institutionally owned platforms are very restrictive on the number of life insurers on the approved list.

Only the independent platforms have added more life insurers, but at last count even these had a maximum of three.

The standard says advisers should be able to use insurance products that are not on an APL.

But it then adds this doesn’t apply if all retail life insurers are on an APL.

ClearView CEO Simon Swanson has criticised the standard’s vague wording and exclusions, calling it “ineffectual”.

“Everything in the standard is ‘should’ rather than ‘must’,” he told insuranceNEWS.com.au.

“That is the weakness in this standard, and it has not tackled the issue of approved lists.”

A list showing which retail life insurers should be considered for an APL is another omission.

The standard mentions a “range” of insurers, which Mr Swanson says will allow the institutions to continue including one or at most two insurers on their APLs.

“The draft does not provide guidance on how broad that ‘range’ should be, mirroring the current situation where large institutionally owned licensees can use their discretion to enforce extremely narrow and restrictive APLs,” he said.

Another curious statement in the draft standard concerns best-practice principles when researching insurers to add to an APL.

The standard says while the requirements “are not mandatory”, “the [licensee] member should have regard to the best-practice principles outlined in the standard and determine what is reasonable given their own circumstances”.

Mr Swanson says such statements are indications of a “Yes, Minister” approach and will do nothing in terms of increasing competition, choice and customer best interest.

“Despite being charged by the Government 18 months ago to develop a new APL standard for the delivery of greater product choice and accessibility for advisers, the FSC has produced a superficial document that will fail to stamp out anti-competitive practices by the large vertically integrated institutions,” he said.

“Therefore, it won’t lead to profound, lasting change and a better deal for consumers.”