The Financial Services Board (FSB) recently released an update of the Retail Distribution Review (RDR) discussion document that was originally published in November 2014. The FSB considered the feedback of 88 commentators on the RDR paper, with additional comment by industry players along with other sources. With this document the FSB aims to regulate the conduct of business in the financial services industry with the focus of treating customers fairly. However, many in the industry say these proposed changes will severely disrupt the insurance industry, especially the broker market.
The RDR put forward 55 regulatory proposals to be implemented in phases, of which 14 subset proposals were identified to be implemented in Phase 1. The latest update of the RDR communicates the next steps for implementation of these proposals, and proposed changes to some.
The document and proposed changes have a direct bearing on everyone involved in the financial services industry, especially the proposals in Phase 1, which deals with adviser categorisation.
The proposals in the document include:
Proposal V: Insurer tied advisers may no longer provide advice or services in relation to another insurer’s products.
Proposal Y: Advisers may not act as representatives of more than one juristic intermediary (adviser firm).
Proposal Z: Restricted outsourcing to financial advisers and Proposal AA: Certain functions permitted to be outsourced to financial advisers.
Proposal FF: General product supplier responsibilities in relation to receiving and providing customer related data.
Proposal OO: Product supplier commission prohibited on replacement life risk policies.
Proposal PP: Commission regulation anomalies and early termination values on “legacy” insurance policies to be addressed.
Proposal QQ: Conflicted remuneration on retirement annuity transfers to be addressed.
Proposal RR: Equivalence of reward to be reviewed.
Proposal UU: Remuneration for selling and servicing short-term insurance policies.
Proposal VV: Conditions for short-term insurance cover cancellations.
Proposal ZZ: Binder fees to multi-tied intermediaries to be capped.
Proposal AAA: Commission cap for credit life insurance schemes with “administrative work” to be removed.
Proposal BBB: Outsourcing fees for issuing insurance policy documents.
Read the full document here.