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Carry on churning, says ABI chief Haddrill

Association of British Insurers director general Stephen Haddrill says churning is essential to drive competition and financial services is the only industry where a degree of churn is not seen as positive.

Speaking at a Labour party fringe event in Manchester on Tuesday, Haddrill hit back at FSA chairman Sir Callum McCarthy’s claims that the financial services business model is failing because of too much churning caused by the lure of commission.

He said churning can foster innovation and competition should create an amount of switching which can be justified as more than just the result of commission payments to advisers. He said this has been seen in several market sectors, such as phone or electricity services, with financial services the only market where it is not welcome.

Haddrill admitted there were some features of the existing market which are not serving the industry or the consumer well but this did not support the strength of the view in McCarthy’s recent speech, he said.

Haddrill said: “It does seem to be the only market in the world where a degree of churn is not seen as a good thing. If you talk about telephone services or electricity services, you argue there should be competition that should lead to people switching from time to time. And that should happen in the financial services market just as much as in any other market so I reject what lies behind Callum McCarthy’s thesis.”

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