Crackdown on churning looms

The life insurance industry is bracing itself for what is expected to be a critical report from ASIC on the continued practice of some representatives pushing product-switching for profit.

The report, originally slated for release last month, is expected imminently and is the product of an investigation into the files of a number of life insurance companies.

It is understood the corporate regulator wrote to a number of life insurance companies this year to request details on policy lapses to help identify instances of profit-motivated product switching, also known as churn.

ASIC also highlighted its focus on the churning last year, when Commissioner Peter Kell warned that the absence of an industry-led initiative to stamp out churning meant ASIC would have to intervene.

“Given our experience with poor advice on life insurance, ASIC considers life insurance sales to be a risk area for non-compliance where high levels of switching are apparent,” he said.

While commission structures are likely to come under scrutiny, the report is also likely to investigate the differences in consumer and adviser behaviour prompted by stepped premiums as opposed to level premiums.