These are some of the big issues we think need to be borne in mind when writing your submissions on the MBIE options paper.
Advice versus non-advice – when is financial advice not advice and how could you tell? A person conducting a no-advice sale is permitted to have the term ‘financial adviser’ on their card and may not be as careful as they should to make limits on their service clear. Conflicts of interest in the sales process were identified in the FAA/FSP review. We would like to see other aspects tidied up. Linking those two issues is the question of how different sales are regulated.
Labeling advisers. We like the idea that if you are selling the same product in the same way the same rules should apply. That recognises that a direct and no-advice sale is different to a full personalised advice sale.
Data to inform customers, such as what the policy covers, and quantifying the impact of different definitions. If a benefit is rarely paid, and we know that, we should tell the client, as we do when we focus on the main benefits in a policy. That is consistent with the principle of utmost good faith and recognises the information asymmetry that both insurers and customers grapple with. If we expect them to disclose everything about their side of the bargain (health and financial data) we should be disclosing from our side. Comparing the cost of distribution is a big headache, we should be disclosing commissions, we probably should be doing more fee-based business, we should also be disclosing other numbers: the claims rate as a percentage of premium, for example, which is distribution channel-neutral.
Complaints – they are low, but there are some worrying areas, particularly a ‘contingent liability of undiscovered complaints’ from poor switches, done by all channels, but more likely to be undiscovered in ‘no advice’ channels
Consumer protection – Consumer right to know: to get a quote, look at a policy, ask questions, and know if they are being given advice or not, choose better products, choose less good products, more of worse compared to less of better, greater scope rather than better quality.
Consumer Perception – the FSC campaign to raise awareness on Income Protection products is a big part of correcting some of the issues in consumer perception. We could do a lot more of this.