Simplifying the advice process is needed to address the underinsurance issue Australia has, according to ClearView.
Speaking at a parliamentary committee, ClearView managing director, Simon Swanson said choosing the most appropriate insurance product for a consumer was difficult and needed a complex conversation with an adviser but that the process needed to be simplified though digital solutions.
“Our view is, if we can simplify the advice process, have best interest duty there, still have an adviser do the right thing by the customer that is fundamental,” he said.
Swanson noted that as soon as a consumer was asked what insurance they wanted it was immediately personal advice.
“As soon as you go into advice you then have to do a full fact find – their needs, aspirations and so on – then you do a needs analysis, and then you do a statement of advice (SoA),” he said.
“Which I’m sorry to say an SoA is between 30 to 50 pages depending on the situation and if you include super it’s probably 80 pages and to be frank they are not a comprehensive document or a sense of ease for a customer to see.”
He said over-regulation had played a role and that the compliance burden on advice businesses and major changes to adviser remuneration under the Life Insurance Framework drove up the cost to service, and the price of advice.
“Advice affordability is deteriorating, at a time when awareness of the need for life insurance has never been greater, due to COVID-19 and record high levels of household debt. We believe that the life industry’s long-term future hinges on a thriving advice profession,” he said.
“When advisers do well and the advice industry is strong, customers have improved access to quality advice and society benefits.
“Reducing the compliance burden will go some way to improve the situation. We maintain that people should be able to choose how they pay for advice – fees, commissions or a combination of both. In addition, advice fees should be tax deductible.”
He noted there were less Australians with life insurance cover and the impact would be Australians falling back onto government social security was “not a good outcome” for society.
“We are working through to redesign products to make it more affordable but deliver on the claims outcome,” he said.