The Association of Financial Advisers (AFA) has called on the Australian Prudential Regulation Authority (APRA) to begin collecting data on fees paid to lawyers on group life insurance claims.
The AFA has made the call in the face of heavy criticisms directed at life/risk advisers by plaintiff law firm, Maurice Blackburn which claimed group life insurance within superannuation represented better value than advised life insurance and that life/risk advisers therefore needed to justify their value.
Responding to the attack, the AFA has issued a bulletin to members in which it states that a comparison of the average claims benefit actually paid shows that people who receive advised are 306% better off when claiming death benefits than those utilising group life and 391% better off when it comes to total and permanent disability (TPD) claims.
“The average claim benefits demonstrate very clearly that those clients who receive specific tailored life insurance advice from a financial adviser receive a benefit far more relevant to their circumstances and their household debt and living costs. This clearly demonstrates significantly more value for financial advice clients,” it said.
The AFA then went on to point to what lawyers were charging superannuation fund members to dispute group insurance claims, stating: “From what we understand, these lawyers often charge at least 30% of the claims benefit”.
“There are no statistics on how much of life insurance benefits end up being paid to lawyers, however the inclusion of this information in the data collected would be very important when measuring value. We call for the collection of data on fees paid to lawyers on life insurance claims,” it said.
“In terms of the full cost to the client, this would need to take into account any costs incurred by the super fund that are otherwise paid for by the member out of their super fund fees, and not just through life insurance premiums. This might include insurance administration, call centres, general advice and even intra-fund advice related to insurance,” the AFA said.