Consumers and risk advisers will remain deeply exposed to insurer efforts to win new business unless the necessary protections are put in place, according to the Association of Financial Advisers (AFA).
As the Senate Economics Committee continues its review of the new life insurance arrangement, AFA chief executive, Brad Fox said that a part of those extended protections the AFA wanted to see the Code of Conduct adopted by the life insurers go much further than it has in order to ensure consumer and adviser protection.
“Until life insurance in superannuation is appropriately included, consumers and advisers remain deeply exposed if insurers offer inappropriate incentives in order to win business.”
As well, the AFA is pressing for an end to the underwriting of direct insurance at time of claim with Fox saying that direct and group insurance need to measure up to community expectations by ensuring all underwriting is undertaken at the commencement of a policy agreement.
“Underwriting after a death or illness occurs is unconscionable,” he said. “Imagine the grief of a spouse who discovers that after paying life insurance premiums for months or years, a claim will not pay out on the death of their spouse – and never would have been paid out.”
Fox said the aim of life insurance reform was to increase consumer confidence and trust and therefore insurer behaviour such as underwriting at the time of claim had to stop.
“Changing this at an industry level through the Code would be a clear sign to Government, public and media that the industry is serious about change. It would also mean that we don’t need a legislative approach,” he said.
“It should also be noted that life insurance arranged with the personal advice of a financial adviser is underwritten at the time of applying for cover which results in faster, straightforward payments at claim time,” Fox said.
