Life insurers need to clarify responses to new regime: Synchron
Synchron has issued an urgent call for life insurers to clarify responses to the new Unfair Contract Terms (UCT) regime, saying advisers need to gain more certainty around how life insurers will treat policies that lapse, change ownership or change premium structure before the new regime will come into effect on 5 April, 2021.
“Our understanding is that lapsed policies, policies that change ownership – for example from inside to outside super and the other way round, a change from level to stepped premiums and even simple typo corrections to a policy, will mean the policy has to be rewritten, which under the new regime means a new contract,” Synchron Director, Don Trapnell, said.
He further explained that if, for example, a policy lapses, advisers would need to know whether the insurers would treat the ‘new’ contract as a replacement policy, or they would take advantage of the new regime to force policyholders into a completely new policy?
Also, they needed to know whether the policyholder would need medical underwriting or they would be forced onto a different premium structure, and if so, would they lose a key benefit not available in the new policy.
According to Trapnell, the way life insurers would respond may compound Australia’s underinsurance problem.
“One of the big worries here is if we have tougher reinstatement, or additional underwriting, more policies will lapse, leaving more people without the protection they need. That’s a very poor outcome for Australia and for Australians,” Trapnell said.
“In the best interests of policyholders and to assist the advisers who work with them, we believe life insurers must now publicly share how they intend to deal with this issue.”
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