From what I have read and discussed, there appear to be some key learnings that we as insurance advisers are going to have to take into account looking forward:

• Context and environment
• Professional conduct expectations, practice vs law
• The measure of suitability.

Also, I appreciate that most of what follows is based on the current AFA standard and not the new code, which we are yet to see.

Professional conduct, what I won't be popular with saying is the FADC's report comments around risk profile as a measure of risk to the insurer is somewhat on target. Underwriters and insurers consider advisers to be the first underwriter of the client, assisting them in ensuring the picture of the client is the picture of the client.

This is why we have the section 10 requirements under insurance law about disclosure to an adviser is disclosure to the insurer.

However, while there is a practical issue in the decision that is relatively easy to manage with investments, it is considerably more difficult with insurance.

And that is the due diligence expected to verify the information provided by the client with external sources.

Moreover, while a lot of the comments have been suggested that getting client medical notes wasn't the intent of the FADC report discussion, it does lead there if you are to take the logic of external verification of the risk profile the client represents to the insurer.

With insurance, there are three key areas underwriters look at:

• Financial - what's the loss and is it demonstrated?
• Occupational and Activities, what do they do and where do they do it, and for how long?
• Medical - what's their health and lifestyle like?

For things like income and financial positions, reasonably easy, authorities for access to Bank accounts, Financial statements with Accountants and ACC. On the financial side where this gets difficult is with accessing information from the IRD and other financial institutions that are not quite so adviser friendly.

The occupation and activities are reasonably contextual, their disclosures, what you see around them, and things like payslips and employment contracts. You'll know they do something a bit risky as they'll generally either tell you or they will have things around that suggest you need to ask more questions. Trophies, stickers, equipment, vehicle accessories, all manner of prompts.

Though more pertinent to the FADC case is the issue of medical information. And stay with me here, I appreciate the intent in the report is likely not to be about getting medical notes.

The FADC decision has the potential to set the expectation that advisers need to submit medical notes with applications to ensure they have done their due diligence, which creates all sorts of havoc.

We have enough trouble with insurers accessing medical information from medical people, having advisers do this is frankly unworkable.

So without the client's authority to access information, the adviser is unable to verify any external sources on the medical side. The D&C signed on the application does not give this authority to the adviser.

So why would we need to do this?

Because the FADC report commentary is suggesting that client disclosure should be verified with third party evidence. And while a good fact find and questionnaire upfront is likely to keep the majority of us out of trouble, it is the extension of the FADC report into the hands of the FMA and how they then regulate us that is the piece advisers need to understand.

Moreover, this is because the people regulating us do not necessarily have an advice background, or have been advisers. Yes, there is capability from industry working in the FMA, which is good. However, that does not mean that the investigator investigating you has any of that. Such reports like this one will be reference sources for those people.

I've said in many other places the new law being based on principals is structured to test cases in court, not in front of panels of industry peers, but panels of our public peers.

This new environment Health & Safety has been working with for three years, and the gloves are coming off. The new regime for us has been clearly signposted to be about three years before the FMA really gets dug in on compliance. So we already have a reasonably clear idea about what that playbook looks like with actions to date and comments released.

The FMA is waiting for all of this to work through, so they can then regulate RFA's like they do with the advice industry they cover already.

I'll be back in the next one to talk suitability.