Risk Product, Company and Regulatory Updates as at 14 May 2019

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Product Updates

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AIA Australia discounts lump sum policies
Eligible customers applying for lump sum policies at AIA Australia can take advantage of a new premium discount offer.

There are 17.5 per cent discounts on Priority Protection or Priority Protection for Platform Investors Lump Sum via the AIA Vitality membership application, with a two-year policy fee waiver. The ‘A Better Break’ campaign runs until 30 September 2019.

Further discounts apply, including:

  • Upfront premium discounts of 7.5 per cent on eligible Income Protection policies where AIA Vitality is attached to the policy

  • A bundled discount of 12.5 per cent applied to Lump Sum premiums when policyholders submit or hold both an eligible Lump Sum and Income Protection policy

  • Five per cent Life and Health discount on eligible Priority Protection and Priority Protection for Platform Investors policies when a policyholder has a myOwn health insurance policy with an AIA Vitality policy

OnePath announces adviser portal improvements
OnePath’s online adviser portal has seen some enhancements recently to improve the ease and efficiency for advisers when managing OneCare life insurance policies. Changes include:

  • Adviser can now use OneView Life Portal to generate quotes to reduce or remove cover on existing policies (ability to implement increases in cover coming soon)

  • Edit a quote that has already been saved and created

  • Easier tracking for those clients paying OneCare Super Premiums via external rollover

  • Track client-initiated requests

  • Check out upcoming events i.e. policy renewals, lapsing policies, applications

  • Client-friendly layout

Integrity Life announces product enhancements
Nine enhancements have been applied to Integrity Life’s product suite. Changes include:

  • Advisers can nominate another adviser with whom to split commissions

  • Clients now have a choice of ownership types to take advantage of the 15 per cent rebate on premiums, for example splitting and combining cover across personal, business, self-managed superannuation and superannuation

  • Reduce premiums by selecting a two-year waiting period for income protection insurance

  • Critical Illness Relapse option for critical illness policies where the cover can be reset after a year, with possible additional benefits on the reset cover

  • Life+ offers reduced costs for the life of the policy when the life insured has a BMI of 18-25, has never smoked, and has no loading-worthy medical conditions

  • Premium waiver available for the Care Support Package when three covers are chosen for the life insured and minimum sums insured are met

  • Portal enhancements

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Company Updates

Asteron Life exiting stage left
Asteron Life will no longer be for sale from 1 July, after TAL acquired the retail product range. The reason, TAL says, is to avoid providing two similar offers to the market. Existing Asteron customers will not be affected.

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Regulatory Updates

Life Code Compliance Committee (LCCC): still work to do
The LCCC’s inaugural annual compliance report reveals that many life insurance companies have work to do on their compliance frameworks.

The report noted that it wasn’t confident that all subscribers had robust compliance frameworks in place, with chair Anne Brown saying: “When we got the data, 22 out of 24 subscribers said their documentation was robust. Two said they had not got there yet. In our view those two gave us the correct answer. There is room for improvement.”

  • Subscribers appear committed to improved adherence to the Life Insurance Code of Practice

  • The quality of data was inconsistent

  • Documentation was inconsistent

  • Processes across the industry were inconsistent

  • There were 24 subscribers across the year

  • Over 130,000 claims were assessed

  • Income-related cover made up 37 per cent of claims (the largest portion of claims)

  • Most claims decisions were timely

  • There were 15,000 complaints made (48 per cent about a policy, 20 per cent about a claim)

  • A larger portion of complaints were from retail and direct channels

  • There were 8,000 individual code breaches affecting a single customer each

  • There were 164 breach events which involved multiple breaches of a code section

  • Overall 1.8 million consumers were actually or potentially impacted

  • Many breaches were transitioning issues with slow updating of policies or systems, despite having nine months to do so

  • Breach events commonly related to policy changes or cancellations, and system issues

  • Individual breaches related mostly to claims

Australasia Wealth Services and Management licence suspended
ASIC has suspended the Australian financial services (AFS) licence of Sydney financial services provider, Australasia Wealth Services Management Pty Ltd until 25 June 2019.

The suspension comes after the company breached its reporting and audit obligations, and its requirement to join the Australian Financial Complaints Authority (AFCA). Since the suspension, the company has obtained AFCA membership, but has not fulfilled its reporting and audit obligations.

Westpac paying back over 30 per cent of fees-for-no-service
Westpac is to repay the ongoing advice fees charged by financial advisers at Magnitude and Securitor, with a cash hit of over $350 million for first half results. The fees were charged between 2008 and 2018, making up almost $1 billion in ongoing advice fees paid by customers.

The split is $297 million for remediation payments, $138 million in interest, and $75 million in costs associated with the running of the remediation program, all pretax.

APRA sends letter, demands action from disability income providers
The Australian Prudential Regulation Authority (APRA) has done a mail-out to individual disability income insurance providers asking them to urgently address its sustainability concerns. APRA is concerned about individually sold income protection business (not group income protection) due to the poor performance of the individual policy market for this type of product.

APRA notes that the industry has lost a collective $2.5 billion via this product over the past five years alone, and there is no light at the end of the tunnel. In the letter APRA lays out its concerns, which include strategy and risk governance, and pricing and product design, saying there isn’t enough data and resourcing in the insurers dedicated to this market segment.

APRA has given life companies two months to take action, including formulation of a strategy to address the issues in the thematic review, and looking to make the industry sustainable.

Download the letter in PDF format

FSC says no to civil penalties for voluntary industry code
The Financial Services Council (FSC) stated in a Treasury consultation response that civil penalties should not apply to a voluntary industry code, and that these penalties are inappropriate for code breaches. The Council believes that remedies should be limited to the statutory right to compensation for loss, since voluntary codes were not developed with civil penalties at their heart.

The FSC has also rejected the involvement of the Australian Financial Complaints Authority (AFCA) or the Government, saying that AFCA’s powers should not include administering penalties for code breaches.

Adviser AFS licences revoked due to dual authorisation with other licensee
Fifty-eight Australian financial services (AFS) licensees have been found to have breached the law after it was discovered they were working under two AFS licences. Licence-holders who were also an authorised representative of another licensee have had their authorisation revoked.