Risk Product, Company and Regulatory Updates as at 16 April 2019

Product Updates

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BT Protection Plan changes
On 1 April, changes were implemented for BT Protection Plans, and a new product disclosure statement, adviser guide and remuneration guide were published. Key changes include:

  • PDS update includes August 2018 SPDS changes, available on LifeCENTRAL

  • Product and medical definition enhancements, including:
    - Child Support Benefit expiry age extended from the review date to the child’s 18th birthday (instead of their 16th birthday)
    - Updated cancer definition to include explicit cover for those who meet a certain level of severity for some rare cancers, but excluding specified early-stage cancers
    - Multiple sclerosis - a single episode of confirmed neurological deficit will allow clients to claim under this condition

  • Income Protection premium increase of 10 per cent across all products, with a 30-day transition period for current applications, does not apply to existing level premium policies

  • Needlestick Benefit premiums have been reduced by 50 per cent for new and existing policyholders

  • IFAs can apply the 20 per cent staff discount for Westpac Group employee clients

  • LifeCENTRAL+ enhancements - web version of BT quoting and application software tool launched, with updates including split premium frequency

  • Policy Fee Waiver campaign ended on 31 March 2019

  • Eligible clients are able to access the My Wellbeing Reward Offer of the My Health Discount (10 per cent discount on Term Life policies) and the My Health Policy Fee Waiver on eligible Term life policies.

  • My Wellbeing initiative launched - health and wellness portal for life insurance clients to provide discounts, health and wellbeing articles, personalised wellness assessments, healthy recipes and fun wellbeing challenges

BT’s Cancer Assistance Program results
BT has been piloting a claims support program to focus on early intervention in cancer claims. The Cancer Assistance Program (CAP) was launched in January 2018, and has had the following results in 35 clients so far:

  • Eighty-six per cent of clients say they have an improvement in functional capacity

  • Client satisfaction is sitting at 90 per cent

  • Clients can access health support sooner, with a reduction overall between notification of claim and commencement of health support interventions reducing from nine months to five months

  • Sixteen of the 35 have completed their health support programs

  • Thirteen of the 16 have returned to full work duties

  • In 19 of the clients whose programs are still ongoing, 12 have returned to work either full or part-time, or have a medical-endorsed and planned return to work date within the first half of 2019

  • Seven of the 35 cases are in the very early stages of recovery or are likely to not return to work due to the severity or declining status of their condition

TAL free grief support training for advisers
A training course in grief has been launched by TAL for advisers to better support clients who may be in the midst of grief. The TAL Risk Academy runs the program, the Supporting Grieving Clients Course, run by Glenn Baird, the head of mental health at TAL.

Baird has over 14 years’ experience as a qualified psychotherapist and trainer. The course aims to arm advisers with improvements in empathy, recognising grief symptoms, and offering tools on how to respond to someone who is grieving. This course is free, on-demand.

Integrity Life announces product enhancements
The first product update from new entrant into the risk insurance marketplace in Australia has been made, with nine enhancements in a technology release. Updates include:

  • Advisers can nominate another adviser to split commissions with

  • Clients can split and combine insurance cover across personal, business, SMSF and superannuation to take advantage of the 15 per cent rebate on premiums

  • Clients can opt for a two-year waiting period for income insurance, reducing the premium

  • Critical Illness policies can be reset after 12 months with the new Critical Illness Relapse option, with added benefits available on reset cover

  • Reduced pricing is available on the Life+ offer for the life of the policy, where the life insured has a BMI between 18 and 25, the person has never smoked, and there are no conditions that may require loadings - this may apply to 30 per cent of new applications

  • When three covers are selected and minimums met, the Care Support Package premium is waived

  • Portal and system enhancements

Asteron Life extends wholesale commission discount offer
An additional 15 per cent first-year premium discount offer for new clients of Asteron Life who opt for the wholesale commission option offer has been extended. Asteron already offers a 24.6 per cent built-in premium discount for the wholesale commission option and its customised 77/22 option.

Company Updates

Freedom Insurance selling admin and advisory business, goal to close its doors
The ASX was informed by Freedom Insurance Group that it has agreed in principle to sell its administration business to a third party for $5 million. The payment will go towards paying admin and remediation costs to customers who suffered financial detriment, to pay creditors, and wind down operations.

The next to go will be its Sydney-based financial advisory firm, Spectrum Wealth Management. Freedom came under fire during the Royal Commission for selling a life insurance policy to man living with an intellectual disability.

Bridges to buy Bendigo and Adelaide Bank advice business
IOOF-owned dealer group, Bridges Financial Services, has entered into a strategic partnership with Bendigo and Adelaide Bank whereby the bank’s financial advice business will be taken over by Bridges via a referral arrangement. The transaction is valued at $3 million plus a further payment on the first anniversary of completion. The bank said it is not in a position to provide the specialised focus required to meet customers’ needs into the future.

Regulatory Updates

SMSF Advisers Network with additional licence conditions imposed
ASIC has imposed new conditions on the Australian financial services (AFS) licence of SMSF Advisers Network Pty Ltd. ASIC was concerned that the network hired a lot of new financial advisers around the same, short period of time.

A review identified concerns that the new advisers were not complying with the best interests duty and related obligations. Examples include that statement of advice (SoA) documents were produced relying heavily on templates, and client files were missing key evidence information to support recommendations to open an SMSF. ASIC wanted more adequate supervision implemented, so required the company to engage an independent expert to review and test the compliance of its advisers.

AMP FP new AFSL conditions imposed
ASIC has also imposed licence conditions on AMP Financial Planning, with the application to vary the licence to provide managed discretionary account services. ASIC is surveilling MDA services and businesses, to ensure compliance of staff and reviews of processes. The extra licence obligations ensure adequate arrangements are in place to comply with the obligations related to the provision of MDA services.

An MDA service is a high-risk arrangement for clients, as they allow their provider to make investment decisions on their behalf on an ongoing basis without prior approval. AMP FP was previously providing limited MDA services that relied on a no-action position issue by ASIC. In 2016, however, ASIC revoked its no-action position with MDAs conducted on a regulated platform involving only the rebalancing of assets on the regulated platform. Providers were given two years to transition and obtain licence variations, which is what AMP FP is requesting.

Update on CBA’s AFSL conditions
ASIC imposed extra conditions onto Commonwealth Financial Planning and Financial Wisdom in 2014, with KordaMentha Forensic as the independent expert to monitor licensee compliance. The action was taken because the licensees didn’t apply review and remediation processes consistently to the customers of 15 financial advisers, which caused disadvantage in some customers.

CBA is required to offer compensation for inappropriate advice that caused financial loss (as applicable) and offer affected customers up to $5,000 to seek independent advice from an accountant, lawyer, or financial adviser. Five reports have been produced by KordaMentha since then, identifying weaknesses in the bank’s approach to its goals and where it is succeeding.

The latest report covers the last of the advice compensation program, with CBA offering a further $2.3 million to 232 clients of five advisers. This is on top of the $6.85 million already offered.

Victims of financial misconduct to have greater supports
The Federal Government is implementing two measures to help consumers and small business victims of financial misconduct. The Government has enabled payments of legacy unpaid external dispute resolution determinations, where those who have been victims of misconduct can receive up to $30 million in compensation owed to them by bankrupt financial firms that would not otherwise be paid.

The second measure is to implement Banking Royal Commission recommendation 4.11, requiring firms by law to cooperate with the newly-set-up Australian Financial Complaints Authority (AFCA) for dispute resolution.

ASIC can now intervene on problematic financial products
ASIC now has powers to intervene when a financial product may cause significant consumer detriment or where it considers the risks of detriment occurring are high. This change is in line with financial product design focusing on the customer, with the design and sale of products having an identified target market in mind.

FPA calls for ‘general advice’ term to be dumped
The Financial Planning Association wants the term ‘general advice’ to be scrapped, and replaced with the term ‘general information’. Other recommendations include that the terms ‘financial advice’ and ‘financial product advice’ should only apply to personal financial advice as per the Corporations Act.