AIG transfer offers stir controversy

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Insurance advisers considering moving books of business away from AIG, or any other provider, must be able to show in a “good, clear and justified” way that it is in their clients’ best interests, according to Vance Arkinstall, head of the Investment Savings and Insurance Association (ISI).

Thursday, October 23rd 2008, 10:26AM

by David Chaplin

Arkinstall said while it would be “anti-competitive” to stop insurance firms from creating ‘transfer terms’ to lure business away from rivals “advisers have to use them judiciously”.

“There is a danger that risk advisers could be seen as clipping the ticket twice, or more,” he said.

AIG New Zealand has come under pressure following the spectacular bail-out of its US parent with many of the insurance giants’ disparate global entities up for grabs. In New Zealand competitors such as Tower and Sovereign are offering attractive terms to risk advisers to transfer AIG policies across.

It is understood AIG has suffered some outflows as a result of these transfer offers but some adviser groups have said the practice could undermine the professionalism of the industry.

Cecilia Farrow, head of national risk adviser firm Triplejump, said none of the group’s advisers have switched clients out of AIG to take advantage of transfer terms.

Farrow said it was “disappointing” that advisers were being incentivised to churn business.

“We’re trying to create a professional industry centred on needs-based advice – insurance is not just a transaction,” she said.

According to Farrow, advisers who do switch AIG policies should also disclose to clients that any transfer could result in a loss of certain benefits. She said the insurers themselves also might be taking on unknown risks by taking on AIG clients.

“I’ve spoken to several underwriters who have managed claims under takeover terms and they say it’s a nightmare,” Farrow said.

Darren Gannon, head of Newpark Financial Services, also criticised the moves to poach AIG business.

Gannon said Newpark advisers have been warned against accepting any AIG transfer offers.

“Most advisers are being responsible,” he said.

AIG, Tower and Sovereign were not available for comment.

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