More Surgical Mesh Injuries Denied ACC Cover
FSC Navigating Regulation Advice Summit

Australia: action against risk licensee over sales practices and best interests tests - and whether they apply here

Risk Info has details of ASIC's investigation and subsequent action against a risk licencee for breaches of best interests requirements. Little detail is given but one item tells us that lack of training and assuming a requirement for cover were central factors: 

"...ASIC has also alleged that NSG has not appropriately trained its advisers and claims it has trained its advisers that it was almost always in a client’s best interest to take out some form of life risk insurance, regardless of a client’s financial situation."

Most current advice processes focus on the sum insured question, with selection on insurer a distant third. The fundamental question of need for cover is often only addressed by implication.  While I agree that most people of working age probably do have a requirement for cover, that doesn't mean the question can be ignored when a client sits in front of a financial adviser, unless it is explicitly agreed to remove it from scope. 

The result? $1 million in penalties, plus other consequences. 

Here in New Zealand, in the unit standards for training on insurance, it highlights the need to consider the alternatives to insurance, and the need to consider state benefits (including ACC) and how they may interact with the insurance programme. So it is already a requirement - at one level - to consider this area as part of your advice here, unless you are specifically severing it from scope. Whether that is effectively brought through into what our regulator expects to see depends on your interpretation of 'reasonable care, diligence, and skill' - but under new draft law and Code, I expect that it should be in the future. 

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

J-P Hale

Thanks for the share on this, many advice processes do assume insurable risks and don't discuss the non-financial instrument approach.

The areas fo Government support are often limited for higher income bracket households but do form a significant part of the discussion when dealing with minimum wage risks.

Estate planning, risk mitigation from business activities, wealth creation strategies to minimise debt and reduce reliance on insurance are plain missing in many insurance focused plans.

Clients rely on us to be the expert, their expert, on their risk matters, if we remove a significant part of this process from our scope we have a duty to both inform and advise on the need to seek further advice, or even better refer that client to a trusted source for that advice.

To sit and say I only do life insurance may be technically correct but it's not a helpful position to put your client in, frankly, it opens them up to finding that advice elsewhere with an adviser who manages their insurance risk and manages their other risk with specialist professions.

The comments to this entry are closed.