Life insurers partly responsible for poor insurance report

Life insurance manufacturers need to take responsibility for last week’s report into life insurance and supply products that meet consumer needs and not research house ratings processes.

The comments were made by Asteron Life executive general manager for adviser distribution Jordan Hawke and were part of the opening plenary session at the Association of Financial Advisers (AFA) 2014 National Advisers Conference in Cairns.

Hawke was asked by AFA chief executive Brad Fox to comment on the report into life insurance advice released by the Australian Securities and Investment Commission (ASIC) last week.

Hawke stated that life insurance companies had spent “a lot of time focused on how to move business amongst each other” instead of focusing on consumers.

“The way we develop products and the cycle we have, leap frogging each other for best definitions and cheapest premiums to satisfy research house ratings rather than thinking about end consumer, has driven a lot of this,” said Hawke.

He also said that report had a subtext that implied the manufacturers should “get on and deal with these issues or if you don’t we will step in and start to take control”.

He said the life insurance sector had not responded to changing consumer behaviour, which included lower tolerances to price increases but continued to offer insurance with stepped premiums, and this was challenging the model and economics behind life insurance providers.

Hawke stated the ASIC report was “quite balanced but called out issues in industry” and applauded ASIC’s release of an advice checklist while expressing surprise that it was the regulator that had taken that step.

He said the report did overlook the 85,000 claims and $5 billion in benefits paid out to life insurance clients “which was never covered in mainstream press because it was not popular”.