Page says the life insurance industry should sort the problem out itself but it has shown that it hasn’t been able to do so.

He says the life companies can’t agree on things and there is little prospect that the dealer groups could sit down together and come up with a proposal.

“The industry in this country has been unable to sort this out,” he said.

“If the industry is smart it will sort it out,” he says. But “I’m fearful that won’t happen.”

Page says there is little doubt churn takes place in New Zealand. Indeed Kepa has exited three advisers from its group over the past 18-months as they were churning business.

“We don’t want to have our brand associated with those advisers churning business,” he says.

Page says the Financial Markets Authority should work with the insurance companies and adviser groups to develop a “common set of rules.”

Some of the problems are defining what is churn and what is genuine replacement business. This is made more difficult as insurance companies regularly engage in one-upmanship and tweak and enhance their policies to out-do each other.

As for the vexed question around whether consumers have suffered because of churn, Page says yes and no.

There may be cases were policyholders have been denied claims for reasons such as non-disclosure or pre-existing conditions, however he doesn’t think its an “endemic” problem.

“There’s not a queue of people saying they are disaffected.”

He doubts premiums would come down if the level of churn was reduced. On this outlook there would be little benefit to customers if changes were made.

When it comes to conflicts, Page is clear it’s an issue.

“Most independent advisers are conflicted everyday of their lives when recommending product,” he says.

The conflict comes in many forms including earning points for overseas trips, getting share allocations and getting contributions to superannuation schemes.

Page says the big issue really is the under-insurance problem.

He says if commission levels fall then many good advisers will leave the industry. This, he says, won’t help New Zealanders get good, independent life insurance advice.

Other CHURN DEBATE ARTICLES

John Body, OnePath Don't make it a war on commissions

Milton Jennings, Fidelity Life Don't follow Australia

Therese Singleton, AMP, AMP surprised

FMA starts major investigation into churn (includes comments from Partners Life managing director Naomi Ballantyne and AIA's Wayne Besant).