06. Selling Life Insurance Flashcards
- Under Part 7.7 of the Corporations Act, what must providing entities do?
- prepare and provide a FSG
- provide the general advice warning if only general advice is provided
- if personal advice is provided, ensure the advice is suitable, provide an SOA and where the advice is incomplete or uses inaccurate information warn the client of this
- What is personal advice?
It is any financial product advice given or directed to a person where the provider has considered one or more of the clients objectives, financial situation or needs or where a reasonable person would have expected given the circumstances for the adviser to have considered these
- What is the purpose of the FSG?
To ensure that retail clients are given sufficient information to enable them to decide whether to obtain financial services from the providing entity.
- When should an FSG be supplied to the client?
Before providing financial services to them (there are some exceptions)
- What are the three key documents provided by an adviser to a client and what are their purposes?
- FSG - what financial service am I getting?
- SOA - What personal advice am I getting?
- PDS - What financial product am I buying?
- Under s945A all personal advice must comply with the ‘suitability’ or ‘reasonable basis for advice’ rule. This means the providing entity must do what?
- Make reasonable inquiries about the clients personal circumstances
- Reasonably consider and investigate the subject matter of the advice
- ensure the advice is appropriate to the client.
- What must an SOA include?
- the advice
- the reasoning that lead to the advice
- all conflicts of interest that may affect the advice.
- Why is it important for the adviser to understand the client’s needs, objectives and personal preferences prior to making insurance product information?
Only after finding out this information will the adviser be able to advise the client of the appropriate level of insurance cover and products best suited.
- What information about existing policies held by a client should an adviser obtain prior to making insurance recommendations?
- The types of policies held
- The sum insured / benefit amount / cash value
- Expiry dates, premium payable, length of time the policies have been in place
- What company is the insurance policy with
- Is it a personal, employer or super policy
- Any exclusions or variations that apply
7 Any policies that have been applied for and declined
- Underwriting is the process of assessing the risk and ascertaining what?
- whether the risk falls within the ‘standard’ range and therefore a normal premium is charged
- the risk is unacceptable and unlikely to improve so decline the application
- the risk is currently unacceptable so either defer, establish exclusions or higher premiums
- What are the areas of risk assessment for a life insurance application?
- health
- occupation
- hobbies and pursuits
- financial, and
- moral
- Why is the adviser often referred to as the field underwriter?
- they choose who applies to the insurance company
* they gain the first impression of the various areas of risk assessment
- What areas do applicants not have a duty of disclosure?
- anything that diminishes the risk to the insurer
- anything that is of common knowledge
- anything the insurer already knows (or ought to know), and
- if the insurer has waived the duty of disclosure
- What must the adviser ensure they do with regard to the duty of disclosure?
- Ensure that they fully understand it
- Point it out to the client
- Ensure it is fully understood by the client.
- An adviser should always follow a set routine and script in completing an application form, what does this include?
- Inform of and ensure duty of disclosure is understood
- Go through questions carefully
- Allow client to fill out
- Review questions making notes of anything additional in adviser’s writing
- Explain declaration and ensure they have reviewed and comfortable before signing
- Keep a copy for records
- Why would an adviser want to have a set routine for the insurance application process?
So if their conduct is ever challenged, other clients can testify as to the adviser’s standard procedures
- Should the adviser tell the client how to answer any particular question?
No, this is directive advice. The pros and cons of each option should be explained, but to protect the adviser, they should not be directive.