The Australian Financial Services Council last month confirmed it would not proceed with its controversial new framework, which was designed to discourage churn.

It proposed a three-year responsibility period on all new life insurance policies and was widely opposed by financial advisers.

The clawback was to have been 100% if a policy was cancelled in the first year, 75% in the second and 50% in the third year.

The situation was being monitored closely by insurance companies in New Zealand, according to a source, who said that insurance companies would still lose money on a policy cancelled within three years, even with the clawback.

Milton Jennings, of Fidelity Life, said his company would love to introduce a three-year clawback period but it had to go with what the rest of the market was doing if it wanted to remain competitive.

“It would be a good idea but we’re not looking to do it at this stage,” he said.

Sovereign said it was not something they were considering at the moment.

Geoff Annals, of Accuro, said clawbacks could be more of an issue for insurers that were “buying business” with larger upfront commissions. “We don’t think it’s a good idea to buy business. It’s appropriate to recognise the costs involved for brokers in presenting a range of options to clients so they can choose the best thing for them.”

The latest Financial Services Council of New Zealand statistics show that lapses are still a problem in this country.

Almost $30 million API in term risk product lapses, surrenders and cancellations were recorded in the December 2013 quarter – about a third of the in-force policies.

The statistics also show lapses, surrenders and cancellations of $10.8 million in API on trauma and $10.7 million in replacement income products.