Insurers' requirement to assess suitability may change adviser landscape

The recent Reserve Bank and Financial Markets Authority report into life insurers highlighted that insurers were not adequately addressing product suitability during a product's lifecycle.

The regulators said their minimum expectation was that insurers were ensuring that customer suitability was considered in product development, had systems and controls to ensure distribution and performance of products was in line with product design and customer suitability, ensured customers understood their policies and had systems in place to ensure ongoing suitability, as well as training and monitoring advisers to reduce the risk of unsuitable products being sold to customers.

That could mean insurers start to play more of a role in what has traditionally been the adviser's job to work out whether a product is right for a client.

Russell Hutchinson, of Chatswood Consulting, said while "suitability" from an insurer's point of view was not meant to mean everything that financial advice meant, any requirement for them to assess suitability would eventually affect advisers.