Limited APLs insult adviser intelligence

When shopping around for private health insurance, consumers are asked to examine the cost and benefits of hospital and extras cover from over 20 providers. Australians in the market for a new car can compare and choose from 14 manufacturers and 30 brands, and those applying for a loan can select from 90 banks and credit unions.

But financial advisers, many of whom are degree-qualified and boast 20-30 years’ experience, shouldn’t have the freedom and autonomy to assess and compare all 11 APRA-regulated insurers in the market to determine the right fit for their clients, according to the Financial Services Council.

Reading the FSC’s draft APL standard, one could be forgiven for thinking that the FSC sees financial advisers as nothing more than distribution agents for their vertically-integrated members given the standard empowers licensees to restrict the number of insurers on their APLs to as little as two.

And the FSC isn’t alone in its views.

The head of a major life insurer was recently quoted in a rival trade publication suggesting that limited APLs are the trade-off between choice and the ability of advisers to “fully understand the breadth of propositions” given the competitive nature of Australia’s life insurance market.

(Whack!)

What a monumental insult!

It seems that despite decades of continuous reform, resulting in advisers becoming more educated, skilled and qualified than ever before, the FSC and its sympathisers still don’t see advisers as professionals.

They still believe it’s acceptable to try and influence advice by restricting product choice.

Under the FSC draft standard, APLs only need offer “choice of multiple life insurance providers”. It’s up to the discretion of FSC members to determine the number of insurers on their APLs and the process by which they get on there.

Based on the FSC’s lax guidelines, two insurers could be deemed adequate choice.

But that’s a significantly lower standard than that recommended by the 2015 Trowbridge report, which proposed at least half of all insurers. ClearView advocates completely open APLs.

It’s time for the financial services industry, led by its professional bodies and product manufacturers, to honour the beliefs it publicly espouses to uphold. Beliefs including the importance of product choice; the value of quality, objective advice; and the growing professionalism of financial advice.

It’s time for the industry to stand up for the practitioners it professes to admire.

Anything short of vehement opposition of the FSC’s standard only reinforces the lie that advisers don’t have the ability, and shouldn’t have the authority, to choose from all 11 retail life insurers in the market.

Silence effectively says that it’s okay for dealer groups to minimise and control product choice.

Yet choice is critical for fostering healthy competition and innovation. It encourages product providers to add value, and ensures a vibrant, sustainable market.

Consumers need choice, therefore advisers need choice.

After decades of examining policies, providing advice and dealing with insurance companies, advisers have earned the right to choose the most appropriate solutions for their clients.

That doesn’t necessarily mean they’ll recommend all 11 insurers.

In reality, many advisers who already enjoy access to the entire market stick primarily to the handful of insurers they know, through experience, will deliver great value and service, and pay claims.

If the industry is serious about delivering improved client outcomes it must advocate for open risk APLs to give advisers genuine choice and the ability to act solely in their clients’ best interest.

Chris Blaxland-Walker is general manager, distribution at ClearView.