AIOFP. We now have a Life Company behaving very badly towards Advisers.

Hi, we now have a Life Company behaving very badly towards Advisers and their clients which cannot be overlooked by the AIOFP and its members.

Like the attitude towards Advisers by Netwealth, Macquarie, Hub 24 over the Interprac Advisers the Adviser Profession cannot let this happen and we must pushback.

Below is a more comprehensive description of the circumstances but the shortened version is Zurich have decided to retrospectively [and without notice or consultation] increase the premium 4 times of Life Policies I – Extend have saved for Advisers and their clients with the obvious intention of destroying the policy.

Putting aside the legal aspect which is currently being assessed, the Ethical considerations and ramifications are serious.

We are recommending that all Members boycott using Zurich products until the matter is settled, please pass this email onto all Advisers for consideration. If you are currently dealing with Zurich a note to the State Manager would be appreciated.

It is time for the Adviser Profession to act as one consolidated political and commercial force.

It has come to the AIOFP’s attention that Zurich/Onepath Australia Limited has taken steps that appear to involve the retrospective reclassification of in-force term life insurance policyholders, by creating what has been characterised as a ‘Death Cover Class’ with a higher-risk premium category. It concerns your clients. It concerns your professional standing. And it concerns the integrity of every long-term insurance promise made in this market.

When conduct emerges in our market that appears to be harsh, unreasonable and potentially unconscionable, the conduct that strikes at the foundation of the adviser-client relationship and the consumer protections that Australian law demands, it is our obligation to speak out. There are moments when an industry must pause and ask itself a hard question. Not what is legal. Not what is commercially convenient. But what is right. This is one of those moments.

The policyholders affected are those whose policies are co-owned through an arrangement involving iExtend, a licensed, adviser-referred, fully disclosed premium continuation product. iExtend enables policyholders who can no longer independently sustain their life insurance premiums, due to health deterioration and often financial pressure that frequently accompanies it to maintain their existing cover through a structured co-ownership arrangement with Perpetual Nominees acting as custodian trustee. These policyholders entered into their original insurance contracts in good faith. They maintained their premiums in good faith. They sought professional advice and engaged a licensed product to protect cover they had built over years. The arrangement is lawful. The advice and adviser relationship was appropriate. The insurer accepted the premium without objection. When an insurer retrospectively alters how an existing policy is treated, after advice has been given, after risk has been accepted and after premiums have been paid strikes at the foundation of trust. Not only trust in advisers, but trust in the insurance system itself.

Consumers affected by these decisions are not abstract policy numbers. They are people who followed the rules. They sought advice. They disclosed their circumstances. They relied on representations made at the time their policy was issued and maintained.

Many of them will never again be able to obtain equivalent cover, as their health has changed, the market has moved, and the policy they are holding may be the only meaningful financial protection available to their families. That is not a theoretical harm. It is real-world detriment, imposed on people who did precisely what the system asked of them.

The co-ownership of a life insurance policy through a licensed, structured arrangement is a lawful activity. It is a strategy voluntarily entered into with the benefit of professional financial engagement, through a product that holds the necessary regulatory authorisations. Nothing in that chain of events is improper, unlawful, or contrary to the terms of the original policy.

Disadvantaging these consumers on the basis of their transparent compliance is not consistent with any principle of consumer sovereignty, professional ethics or fair dealing. It is their antithesis.

Financial advisers operate under one of the most demanding regulatory frameworks in the country. We are required to act in the best interests of our clients, document our reasoning, explain risks, disclose conflicts and stand behind the advice we give, often for decades. When we recommend life insurance, we do so on the basis that the rules in place today will not be rewritten tomorrow to the detriment of the consumer.

That assumption is now under strain. Advisers with clients in this situation are left holding the consequences of a decision they had no part in making. They are the ones who must explain to clients why something they were told was guaranteed no longer feels that way.

They are the ones who must justify advice that was appropriate at the time but is being undermined after the fact. They are the ones whose professional credibility is placed in question by conduct they cannot control and did not foresee.

AOIFP members who provide life risk advice will need no reminder of what the past seven years have looked like. Since 2017, the profession has navigated substantial premium increases across virtually every major insurer, driven by a combination of industry mispricing, regulatory change, and claims experience.

Many clients have reduced cover. Some have lapsed policies that should have remained in force. Chronic underinsurance is now a recognised feature of the Australian market. Zurich’s reclassification adds another chapter to that story and it compounds the professional burden on advisers who have already spent years managing the consequences of insurer decisions that did not serve their clients’ interests.

That is an impossible position for any profession that claims to put consumers first. We should not accept it as a normal feature of professional practice.

There is a structural problem at the heart of this situation that goes beyond any single insurer’s conduct. It is the problem of unequal accountability. Advisers are already held to account when outcomes fall short.

We accept that responsibility. It is the responsibility of a profession that holds itself to a standard of care. When advice is imperfect, when circumstances change, when outcomes disappoint, the adviser is scrutinised, documented, assessed and, where warranted, held responsible.

That accountability is appropriate and the AOIFP supports it. What is increasingly unacceptable is a system where advisers are expected to shoulder ethical and legal obligations while product manufacturers face no equivalent scrutiny for decisions that directly undermine consumer confidence.

Advisers cannot act in the best interests of clients if the foundations on which advice is given are unstable. The obligation to act with integrity cannot be the exclusive burden of the distribution channel while the product manufacturer reshapes commitments without consultation, warning or accountability.

This issue cannot be dismissed as a commercial disagreement between businesses. It is a consumer issue; a professional standards issue and a systemic risk issue. And the systemic risk is this: if retrospective reclassification becomes normalised, if product providers can selectively reinterpret commitments already made then guaranteed renewability becomes conditional, not guaranteed.

Once that line is crossed, every Australian with a long-term insurance policy is exposed. Not just iExtend clients. Every policyholder who believes the promise in their contract means what it says.

The AOIFP acknowledges that the precise legal basis for Zurich’s actions remains to be fully established. We are not in a position, nor is it our role, to make definitive legal determinations on behalf of members. What we can say is that on the basis of the information available, the legal premise for these actions is far from clear.

In-force guaranteed renewable life insurance policies carry a contractual commitment that the insurer will not reassess the health or insurability of the policyholder after inception.

Premium rates may be adjusted, but only on a legitimate class basis defined by objective product characteristics, not by post-inception inferences about the health status of specific policyholders.

Creating a repricing class defined in substance by a policyholder’s health deterioration even where that is done through the mechanism of an observable ownership structure raises serious questions under the Disability Discrimination Act 1992, the Privacy Act 1988, and the duty of utmost good faith under the Insurance Contracts Act 1984.

While life insurers have a specific exemption permitting risk-based underwriting at inception, that exemption applies to the underwriting decision. It does not create an ongoing right to reclassify in-force policyholders based on health information that emerges after inception, particularly where the policy is guaranteed renewable and health re-assessment was never a contracted right.

Using iExtend involvement as a proxy for health deterioration, is precisely what such a reclassification would be doing. The class is not defined by a product characteristic. It is defined by the health status of its members, as inferred from their use of a product designed specifically for people in declining health.

This would constitute the use of sensitive health information for a purpose other than the purpose for which it was originally collected, namely provided to iExtend to maintain premium payments on an existing policy. The unauthorised use of third-party data to profile your clients for the purpose of reclassification raises separate concerns under dealing with unsolicited information and use and disclosure of personal information.

The insurer receiving a dataset identifying which policyholders are iExtend-supported, effectively as a health-status proxy and acting on that data to reprice those policyholders would be difficult to defend and is unconscionable. The consumers affected are, almost universally, people in deteriorating health who have maintained their insurance premiums with professional assistance because they understood the value of that cover.

To impose a premium increase on this cohort, identified through the transparency of their disclosed arrangements, targeted through a reclassification that the original policy terms do not obviously permit is conduct the AOIFP does not regard as meeting the standard the profession is entitled to expect of its product partners.

The AOIFP’s position is that the legal foundation for what appears to have occurred does not appear to be sound. Members and affected clients should seek independent legal advice and should not treat the conduct as settled or unchallengeable.

The AOIFP wishes to be direct on a point that sometimes gets lost in regulatory and legal debate: the fact that conduct has not yet been determined to be unlawful does not make it ethical. Our profession operates to standards that exceed the legal minimum. We expect the same of the product providers whose products we place with clients.

The mere legality of a decision does not confer upon it the status of ethical behaviour. The legality of Zurich’s decision is yet to be clarified. But from the information available to the AOIFP, the actions described do not appear consistent with the high ethical standards that our association supports, that legislation demands and to which the consumer can reasonably expect and rely upon.

Regulators exist to prevent precisely this type of erosion of consumer protection. APRA, ASIC and the Life Code Compliance each hold oversight responsibilities that are directly engaged by what has occurred here. Silence in the face of conduct that creates uncertainty, discrimination and retrospective harm is not neutrality. It is abdication.

The AOIFP calls on each of these bodies to examine the conduct described in this communication and to make clear, publicly and promptly, whether it is consistent with the regulatory framework they are charged with enforcing. Regulators, consumer groups and policymakers should be paying close attention.

If this conduct is allowed to stand, it sets a precedent far beyond a single insurer or a single cohort of clients. It reshapes the risk borne by every Australian who relies on life insurance as a safety net and the advice what was provided in good faith by every licensed adviser.

If you have clients who are iExtend-supported policyholders with Zurich, we recommend the following immediately:

• Document everything, original policy advice, iExtend referral, and any Zurich communications on repricing or reclassification.
• Do not accept adverse changes without challenge as the legal position is unsettled.
• Inform affected clients of the change, its likely impact on their policy expectations, and their right to challenge it. They relied on your advice. They deserve your guidance now.
• Your best interests duty continues. An insurer’s unilateral action does not relieve you of your obligation to your client. It intensifies it.

Advisers have been held accountable and have done their job in line with regulations, best interest duties and obligations. Consumers did what they were asked to do. They sought advice, they disclosed their circumstances, they engaged licensed products and they paid their premiums to keep the policy in-force. The question now is whether the system designed to protect them is willing to do the same in this instance.

The AOIFP’s answer is unambiguous. We represent advisers who believe that protecting consumers starts with integrity in product behaviour. We will not normalise conduct that retrospectively undermines the promises on which advice is given and on which consumers rely. Ethics cannot be optional and consumer harm cannot be collateral damage. Trust, once broken, is not easily repaired.

The guaranteed renewable promise was the foundation of the advice our members gave and the contracts their clients signed. If that promise can be reshaped without consultation, without legal clarity and without accountability, then no long-term insurance commitment can be fully relied upon. That consequence is too serious to ignore, too systemic to treat as a bilateral commercial dispute, and too harmful to the consumers we serve to allow to pass without challenge.

We hope you can agree with our position.