The Association of Financial Advisers (AFA) has warned against the use of direct life insurance channels for its “inherent weaknesses” compared to advised retail life insurance.
Incoming national president, Marc Bineham, said consumer outcomes from direct and group life insurance did not stack up when compared to advised life insurance cover.
In 2015, $7.2 billion in life insurance claims was paid to over 80,000 Australian families, out of which 70 per cent of claims (just over $5 billion) were paid via the retail life insurance channel.
Bineham pointed to the Australian Securities and Investments Commission’s (ASIC’s) findings that retail advised life insurance provided better claims outcomes than group and direct as the adviser’s legal responsibility was towards the client rather than the insurer.
“This is no coincidence, as life insurance advisers provide greater certainty to their clients in two ways,” Bineham said.
“Firstly, advised retail life insurance is underwritten at application time, rather than at claims time as is often the case with the other forms of life insurance. And secondly, financial advisers manage their clients’ claims.”
ASIC’s report into life insurance claims (Report 498) provided the industry with an opportunity to participate with the regulator and the Government in this review and earn its social licence with clients, Bineham said.
However, he noted the report revealed more needed to be done to engender trust in the life insurance industry from clients.
