Insurance reform needs focus shift: AFA

23-Feb-2017

By Leanne Abbas

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The Association of Financial Advisers (AFA) called on life insurers, licensees and the corporate regulator to intensify their efforts to reform the life insurance sector as the Parliamentary Joint Committee (PJC) hearings into the industry kicked off yesterday.

The industry body said its members had done their part to engage with insurance reforms following the passing of the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 through the Senate two weeks ago, and suggested the focus should now be on other key industry players.

AFA chief executive Brad Fox said the best way for Australians to receive trusted life insurance was through advised life insurance, and he expected the PJC to explore ways to motivate Australians to seek cover.

“We expect the PJC members to be directing their questions to what else, beyond commissions, must be addressed in order to encourage more Australians to take out appropriate levels of income protection and lump sum life insurance policies,” Fox said.

“We also expect the PJC to have a keen interest in the poor relative performance of the direct and group life insurance channels.”

Fox also noted the life insurance framework supported the obligations placed on life insurers, licensees and the regulator by the minister and other associations.

He highlighted the importance of the Financial Services Council’s new insurer code of conduct being fully adopted and adhered to by life insurers to help protect both consumers and advisers.

“Until life insurance in superannuation is appropriately included, consumers and advisers remain deeply exposed if insurers offer inappropriate incentives in order to win business,” he said.

In addition, he said it was essential all underwriting be undertaken at the beginning of a policy agreement, regardless of the channel a policy was bought through, to avoid creating discomfort for clients and their families at difficult times.

The AFA also expressed the need for the expansion of approved product lists beyond offering one or two products in vertically integrated advice models.

“Advisers in such a business model are almost forced to walk a grey line between their own best interests and those of their clients,” he noted.

He added ASIC needed to get behind simplifying statements of advice for life insurance.

“With a legislated best interests duty, less commissions, higher minimum education standards and subscribing to a code of ethics becoming the norm, documentary proof of the advice being given must become simpler and easier to deliver to the client,” he said.

The AFA is due to appear at the PJC’s Sydney hearing on Friday, in addition to several other advice industry stakeholders.

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