Mis-selling claims will impact message around value of life insurance
News of the mis-selling of ‘personal insurance' by a large insurer will not make it easier to promote the benefits of life insurance provided by qualified financial advisers according to Association of Financial Advisers chief executive, Brad Fox.
Fox was responding to reports in Fairfax media that Combined Insurance, part of US financial services firm ACE, is currently the subject of an investigation by the Australian Securities and Investments Commission (ASIC) due to claims of intentional mis-selling of personal insurance policies driven by commission based sales.
According to the Fairfax report Combined Insurance had used an agency model but has since moved to subcontracting to smaller insurance firms prompting Fox to state that this was not the model used by advisers who provide life insurance.
"This is a very different model to that used by qualified financial advisers who provide life insurance to their clients. It appears to be a tied-agent employee model which is a very out-dated business practice. This will not make it easier for consumers to get a true and correct meaning of the importance of life insurance," Fox said.
The Product Disclosure Statement (PDS) provided by Combined Insurance for its personal insurance product states "The Policy is not a life insurance policy, income protection policy, nor a health insurance policy" and that Combined Insurance was "signatory to the General Insurance Code of Practice".
Fox said the distinction between this model and that of insurers and advisers operating within the life insurance sector was marked with financial advisers able to provide certainty as to whether a client was covered.
"The stark difference is that when using an adviser a client will know at the time of getting the advice whether the policy is underwritten. The model in the report does not show the weaknesss or appropriateness of the policy until the time comes to assess a claim."
The claims of mis-selling and news of an ASIC investigation follows the regulator's review of the life insurance sector last year which found problems with life insurance advice when high up-front commissions were involved.
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Jason Spits
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