Chatswood Consulting’s Russell Hutchinson says a conversation between regulators and industry is needed to determine what systems and controls are required to ensure suitability of product for the customer.
The FMA and RBNZ noted in their recent report on insurers’ conduct and culture (click here) that more work was needed by insurers to ensure ongoing customer product suitability.
“The issue around suitability is that the industry should be carefully making sure that the customer is getting the best deal,” said Hutchinson.
“So that’s about ensuring the right customer buys the right product. It doesn’t matter whether it’s direct or through intermediaries – that same product, that same choice – we do need to make sure that those choices are being handled appropriately.”
But he noted that the regulators have drawn attention to a lack of evidence of good systems and processes ensuring suitable products are being sold to customers.
“They [the insurers] may have quite good processes around suitability – it’s just that they were unable to evidence them to the satisfaction of the regulator,” said Hutchinson.
Nonetheless, he said it was important the insurers respond to the concern, particularly because of the complicated nature of life insurance products.
“When you have that power imbalance or information asymmetry then the onus is on us and we really need to take responsibility for that.”
“When you have that power imbalance or information asymmetry then the onus is on us and we really need to take responsibility for that,” he said.
“I think most insurers want to do that but they are being given a hurry-up by the regulator and told ‘you need to do a better job’.
“There’s no clear evidence that it’s been done wrong deliberately or systemically, but they are saying we need to do better and they are probably right.”