The Financial Services Council’s Life Insurance Code of Practice needs to strengthened to ban insurers from adopting sales tactics which interfere with the quality of advice, according to the Association of Financial Advisers (AFA).
The AFA has used its submission to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the Life Insurance Industry, to point to the shortcomings in the Code of Practice.
It said it was recommending that “a comprehensive code be developed to, amongst other things, ban the sales tactics of insurers that are likely to interfere with the quality of advice”.
“To this point, we again call for the Financial Services Council (FSC) to update their Code of Practice to enable this outcome for the common good and benefit of consumers,” it said. “In the AFA’s view the FSC’s Code falls short of what is needed to adequately reform the culture within life insurers, deliver better practices and protect the interests of Australian families relying on their life insurance to protect them.”
It said “the most glaring deficiency with the code (which to be fair the FSC has acknowledged) is the insufficient coverage”.
“As superannuation trustees are not covered by the code, not all life insurance policies will be protected by the code. Likewise, there are carve outs for legacy products that are still in use, claims subject to legal proceedings, improvements to medical definitions and the requirement to underwrite policies,” the submission said.
“These selective omissions and carve outs are not in the interest of consumers and require scrutiny from Parliament to find out why they are necessary,” it said.
