The financial planning industry must explain why, based on new Australian Prudential Regulation Authority (APRA) data, consumers appear to be worse off when they consult a risk adviser, according to a senior lawyer within plaintiff law firm, Maurice Blackburn.
The firm’s superannuation and insurance principal, Josh Mennen has pointed to APRA data released this week dealing with life insurance claims and handling processes and has claimed the report reinforces the superior value of group insurance through superannuation.
He said the report had shown group insurance continued to have a key role in delivering value and strong outcomes for consumers, particularly when compared to policies sold by financial advisers.
“This report has some very compelling data that makes clear that group insurance through super remains a crucial product that delivers significantly greater value for consumers than other policies, including those supposedly tailored by financial advisers,” Mennen said.
“The data show that the claims paid ratio – the dollar amount paid as a percentage of annual premiums - for super total and permanent disability insurance was 85%, compared with 45% when sold by financial advisers,” he said. “It also shows that income protection through super led to just 33.7 disputes per 100,000 people insured, compared to retail income protection policies, which came in at a staggering 150.5 disputes per 100,000 people insured.”
“This reinforces that while adviser-sold policies are often marketed as a bespoke product, too often they are compromised by conflicts of interest, including insurers paying trailing commissions that result in poor product selection and claim disputes caused by underwriting complications.”
“The financial planning industry must explain why, based on this data, consumers appear to be worse off when they consult a risk adviser,” Mennen said. “It also must outline how it is going to ensure insurance recommendations are genuinely in consumers’ best interests in order to win back public confidence.”