FMA says commission drives churn

The FMA requested four years' data from the 12 main insurers in New Zealand to conduct research on replacement business.

It looked only at insurance advisers - not banks or other product providers - because while they might have a risk of mis-selling, the FMA said it was only advisers who could "churn" - move clients for the benefit of the adviser - multiple times.

FMA director of regulation Liam Mason said: "The reason we are looking at this issue is not because we say this is the only potential issue in the life insurance market. This distribution channel covers over 40% of the in-force life insurance policies in New Zealand and is where there is a high risk of churn. This was a specific data-gathering exercise to look at churn, not a clean bill of health for other distribution channels."

The FMA took a particular interest in 1100 AFAs and RFAs who have more than 100 active policies on their books and 200 advisers who were seen as "high volume", with a high rate of replacement business. Forty-five of those replaced more than 20% of policies in a single year.