A member of the Senate Economics Committee has described direct insurance and underwriting at the time of claim as a serious problem for the life/risk industry that needs to be addressed.
NSW National Party Senator, John Williams expressed his concern during the appearance of the Financial Services Council (FSC) before the committee, echoing recent concerns expressed by both the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA).
After receiving an explanation of the workings of the underwriting practice, Williams said he believed it was a serious problem “when people think they have insurance and it may well not be the situation when tragedy strikes”.
“I think that is a really serious problem, when families take out their direct insurance thinking that the family is covered,” he said.
“For example, a bloke takes out insurance, he dies of a heart attack, they check out his history and they find that at two weeks of age the baby has had a valve replaced in the heart so they are not paying. That is where I see a series problem in the industry, which I think this committee must address.”
Earlier, FSC policy manager, Bianca Richardson had told the committee that while some direct insurance providers underwrote at the time of application, this was not always the case.
Both the FPA and the AFA have called for action to address the problems of insurance being underwritten at the time of claim.