The FSC, which represents life insurance, superannuation and managed fund providers, has produced a brochure and form for advisers to give to clients who are thinking about replacing risk products.

In 2010, the Investment, Savings and Insurance Association drafted some similar guidelines but FSC chief executive Peter Neilson said they never gained traction, partly out of fears that they were anti-competitive and partly because of the looming regulatory overhaul.

“Now we have regulations and the FMA has made it clear that it expects advisers to give holistic, useful advice and act in the best interests of clients. But how do you establish that unless there is a process for doing so?’

The FSC’s form says it should be whenever an existing Term Life, Disability, Trauma, and/or Income Protection policy or benefit is to be replaced, exchanged or converted.

It asks whether the adviser will receive something from the insurer in return for the new contract, for the reasons why the policy is being replaced and for details of all the risks covered by the client’s existing policy that will not be covered by the new one.

Clients are told that advisers should take into account their personal situation, medical conditions, ability to cover stand-down periods, the cost of maintaining a policy and the financial strength rating of the insurers involved.

Neilson said an earlier draft of the documents recommended that before a client changed to a new agreement, they give their existing provider a chance to make a counter-offer. “We took that out because it could be anti-competitive… obviously at that stage there is already some issue with the previous provider.”

He said the form was not compulsory for FSC members. “If it is useful, more people will use it. If not, most people will have to develop something similar.”

IFA president Nigel Tate said there were some issues with the wording of the form but the bigger problem was that it was totally irrelevant for authorised financial advisers, who had to meet high regulatory standards, anyway.

He said if the FSC could not get all its members to adopt the form, "why on Earth would practitioners use it? Everything in here is covered by regulation. It just adds paperwork and no value.”

Tate said the only benefit would be that the form required registered, not authorised, financial advisers to put their recommendations in writing.

But he said until customers who were replacing their policies with those offered by their banks were also regularly touting similar forms, it was pointless. “It’s a good way to enhance the credibility of the FSC with the Government but it doesn’t do a great deal for the consumer.”