'Go further than the code' ASIC tells life insurers

28 April 2020

Life insurers should be prepared to go beyond the hardship provisions of the Life Insurance Code of Conduct when dealing with people suffering financial hardship as a result of the COVID-19 pandemic, according to the Australian Securities and Investments Commission (ASIC).

In a letter sent to the life insurers late yesterday, the regulator said it “expects insurers to consider, where appropriate and reasonable, going beyond the hardship provisions of the Code and reviewing options for premium ‘holidays’ or deferrals for consumers who are no longer able to pay premiums due to reduced income”.

It said the same level of leniency was demonstrated by the life insurers in dealing with the summer bushfires and that it expected a similar approach could be adopted with respect to COVID-19.

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“We recognise that some insurers introduced this type of flexibility in response to the tragic bushfires of summer 2019-20, and we consider a similar approach is just as important now, given the broad effect that the COVID-19 pandemic is already having on many Australians. We expect insurers to try to find workable options to allow consumers in hardship to continue their cover.

“ASIC also expects insurers to consider whether outcomes will be fair for consumers if they have to actively ‘opt in’ or make a request in order to receive any benefit insurers offer in response to the Covid Pandemic,” it said. “For example, consumers who are struggling to pay their insurance premiums may simply allow the policy to lapse rather than contact their insurer to cancel it. If an insurer relies on consumers to contact them to discuss options for retaining their cover, this can result in inconsistent and unfair outcomes for policyholders.”

“Vulnerable consumers will be under considerable stress – accordingly, for some benefits to be effective they may need to take effect automatically, without the need for any action by the consumer,” the ASIC letter said.

The letter said that insurers should also apply appropriate flexibility in their treatment of consumers whose personal and/or working conditions have changed as a result of the COVID-19 pandemic, “for example where these working conditions impact their income protection or TPD claim outcome”. 

“In particular, insurers should proactively apply the urgent financial need provisions in sections 8.27 to 8.30 of the Code for all affected claimants, including consumers making a COVID-19 pandemic related income protection or TPD claim.” 

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How about the regulator waiving licence and other associated fees for advisors under going financial stress related to COVID 19?

Tell me, someone not being able to afford their insurance premiums - is this a good reason to access Super?
Now isn't that a politically charged question?

The answer is YES.
Retirement may be 20 years away, but you have to get their first and in one piece.
Funding vitally necessary insurance cover to ensure you or your family continue to be financially secure in the event of unforseen circumstance is a risk mitigation strategy.
In a period of unemployment, financial stress or reduced income, the impact of a death, permanent disablement or serious illness on a family, individual or business is magnified even more.
The trustees of the super fund are not obliged to enquire as to the purpose of the withdrawn funds and so it appears there is no regulatory restriction.
Whilst it easy to argue that withdrawing the super monies will have an impact on future retirement, it is not as simple to justify the value of paying for the insurance cover because an event may or may not occur.
If an insurable event does occur, then the decision to retain and fund the insurance cover has been a valid and valuable decision. In the event nothing happens, people will use retrospect and potentially consider it the wrong decision because nothing happened. This has always been the challenge regarding the purchase process of an intangible product.
This is human nature and this is why the discussion and decision making process regarding implementing and retaining necessary insurance cover is one which an experienced risk professional can clearly demonstrate the need to retain an intangible item which may possibly never deliver a benefit.
Withdrawing the full or part portion of the superannuation funds at this time in order to continue valuable and necessary insurance cover, to fund mortgage repayments or even to maintain private health insurance cover should all be valid as long as the member is made fully aware and informed of the long term consequences of that decision.

So what happens to the advisers remuneration when the premium waiver is invoked ASIC ????.........it stops.
So what happens when the client requests advice from the adviser in relation to the potential premium waiver or premium holiday option and the advisers remuneration for that client then ceases ?
When a premium waiver or premium holiday is invoked, more often than not, the insurance cover is also suspended during that period when the premium is not paid, therefore the client may not be covered.
No premium paid, no cover in place, no remuneration being paid to the adviser, even though the advice responsibility still rests with the adviser........is the adviser then meant to continue to advise the client during this period for nothing ?
The ongoing renewal remuneration payment is the method by which advisers can continually deliver a range of advice services including potential claims management throughout the year for the client.
Imagine if the client comes to the adviser requesting advice on various options available to them in order to cease premium payments and the adviser completes an updated fact find document and either an ROA or SOA and then issues an invoice to the client for the time taken for discussion, documentation and implementation because the ongoing remuneration that would have been paid to at least cover some of the adviser's costs has now ceased
Does ASIC believe the advisers should be working for nothing ??????
Interestingly, ASIC claim that " vulnerable consumers will be under considerable stress"..that is entirely true,
but what about vulnerable advisers who are under considerable stress whilst having many aspects of their remuneration removed or reduced through no fault of their own?
Is ASIC saying that advisers who are already under stress should work for nothing ?
It also appears that ASIC believe the consumer does not hold any responsibility to contact their insurer and request information on available options and that the onus is on the insurer to contact the customer.
I obviously doubt whether adviser's best interests are of any concern whatsoever for ASIC as they are only ever concerned in cutting them down.

What's the point of having any kind of code if the person standing behind you with a big stick just gets to ask you to reinterpret it whenever it seems convenient for them to do so?

When is ASIC going to give us some relief? We small businesses are struggling as well, mainly due to ASIC. Why cant asic waive our levy for this year? Are we not worthy of relief? We have had to get rid of all clients that are not able to pay for a ROA or SOA every year, as per instructions from ASIC. No ROA or SOA every 12 months, = refund fees. These very clients are the ones that need advice now, but how can we do that for $300? You dug this hole ASIC and now you are burying us all in it, so dont be so bloody hypocritical, you are treating us like crap but you expect the insurers to act differently?? Go jump on your head asic..

Very concerning that ASIC is behaving in this way. For any government department to believe they have the power to instruct private enterprise like this simply shows how out of kilter this country is.

Free market economy is not a term that ASIC recognise.
Misuse and abuse of power is one they do.
Yet again this morning on ABC radio, they had an interview with the CEO of Choice, Alan Kirkland and comments from Gerard Brody from the Consumer Action Law Centre regarding general insurance issues.
The ABC as the national broadcaster and as a tax payer funded organisation, is of course meant to be unbiased and neutral in it's position and nothing could be further from the truth.
Whilst there are many great aspects of the ABC, there are also some very dark and very clever strategies they employ to make it appear as though they are balanced , but are clearly not.
Both Choice and the Consumer Action Law Centre have been grossly and unfairly critical of financial advisers for many years and are doggedly politically motivated.
The connections and interactions with Choice and ASIC are becoming more well known than ever before.
There is a clear and disturbing pattern of left wing, politically aligned organisations becoming informants and advisers to Govt and to ASIC.
The infiltration of the FASEA Board is just one example of the veins that stretch across the control of private enterprise and regulatory process that is clearly skewed by ideological agenda and political standing.

And this is all happening at a time when we have a supposedly right of centre government at the helm. God help us.

it is very concerning to see this type of behavior from this regulator. regulatory overreach and this is a regular occurrence. they have destroyed financial planning altogether.

we need a complete clean out of asic.

You try getting them to do any of this ASIC!!
TAL for example have imploded. Can't get anything done in under 3 weeks. Hold times 2-3 hours.

Communist ASIC at it again. Next thing you know, they will try dictate how much Advisers should be paid, and want ASIC staff in every bank... ohh wait, they already have.

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