There is a danger that Australia’s financial services regulatory regime may deter the capital investment necessary to develop the Australian robo-advice market, according to MLC Life Insurance.
The big insurer has told the Productivity Commission (PC) that it is concerned that as robo‐advice technology matures globally and lowers the costs of financial advice, including with development of life insurance robo‐advice engines, “Australian financial services regulation may slow or stop Australian consumers from being able to access these benefits”.
“This could occur because local providers are deterred from undertaking the capital investment required to develop robo‐advice or overseas providers prefer to expand into less complicated markets,” MLC Life told the PC inquiry into Competition in the Australian Financial System.
Elsewhere in its submission, MLC Life said that while the company was positive about the trajectory of robo‐advice in life insurance and its deployment in Australia, it was “alert to the potential difficulties robo‐advice providers may have in complying with Australia’s financial services regulatory regime”.
“In particular navigating the fine difference between general and personal advice and meeting the statutorily defined best interest duty may be challenging for providers,” it said. “Depending on the objective of the robo‐advice engine, the outcome could be simple factual information that helps clients make decisions, or it could be general advice or personal advice.”
The submission said any financial services market participant needed to understand the fine lines separating information, general and personal advice with the latter two outcomes requiring an Australian Financial Service Licence (AFSL) and in the case of personal advice providers the need to understand and meet certain statutory obligations, including the best interests duty.
“For service providers trying to provide a useful service to consumers it is easy to stray from one type of information or advice to another,” it said.
The submission said that MLC Life had recently developed its Lifeview tool intended to make it easier for members of superannuation funds to manage any life insurance they hade as part of their membership.
“Lifeview includes two calculators to help guide members in their decisions. The first calculator asks the customer to input information about their circumstances and based on this suggests the type and amount of cover that might be meet their needs. The second calculator separately quotes how much a given amount of insurance might cost,” it said.
“From a customer experience point of view, it would be logical to combine both calculators so a customer is able to determine both the quantum of insurance required and the cost of the insurance,” the submission said. “Unfortunately providing both in the one place would be considered as providing advice, which exceeds the terms of MLC Life Insurance’s AFSL.”
It said that apart from the diminished customer experience, separating the sum insured calculation from the quotation calculation risked consumers missing out on all the information required to make an informed decision.
