The FSC is funding a report by actuarial firm Melville Jessup Weaver into the issue for commission in New Zealand’s insurance industry.

The report is rumoured to have cost $500,000 and is proving divisive among FSC members for its view that commissions are too high.

That has riled insurers who use adviser channels.

Partners Life yesterday announced it was giving notice of its resignation – FSC now requires 12 months.

Today AIA has confirmed it has followed suit and it is believed other members will follow.

AIA chief executive Natalie Cameron said the MJW report was counterproductive and should not be published.

She said the present review of the Financial Advisers Act is welcome and it was important the FSC’s contribution to the debate was informative, constructive and balanced, goals she said the report failed to achieve.

“AIA supports reform of the Act, as we set out in our submission to the Ministry of Business, Innovation and Employment,” says Cameron. “Under-insurance is a major issue in New Zealand and the industry needs to work hard to eliminate impediments to families receiving coverage.”

But she said the FSC report was biased in its treatment of market participants, singling out financial advisers.

“Different distribution channels using different remuneration models are needed if we are to increase availability and affordability. For instance, the Council report could have singled out banks, whose employees are remunerated on a bonus structure or volume basis, a key conflict of interest risk highlighted by the Financial Markets Authority in its Strategic Risk Outlook. Banks also perform an important role in this market and have their challenges – for example the financial products and union Fintec has called for the sales targets for bank staff to be reduced – yet it is the advisers who have been singled out in the FSC report.”

Cameron said there was an important balancing act between protecting the consumer but at the same time not unduly restricting access to financial advice.

“It is vital that specialist sellers of insurance products remain in the market.  We believe that misdirected regulation has the potential to remove choice from the market – which would impede
access to insurance, not increase it,” she said.

“It is disappointing that the FSC has taken this stance, despite strong advocacy for the IFA market from a number of insurers,” comments Cameron.  “It does not represent the views of AIA. We feel we have no other option but to withdraw our membership of the FSC at this time.”

EARLIER STORY: Partners Life stands up for advisers