Life insurance companies should have the right to unilaterally amend policy terms if it will benefit a majority of consumers, according to the Financial Services Council (FSC).
Answering questions on notice for the Parliamentary Joint Committee on Corporations and Financial Services, the FSC said it was recommending that the Insurance Contracts Act be amended to allow life insurance companies to “unilaterally amend policy terms where the overall benefits enjoyed by cohorts of consumers are greater than those that the consumer currently enjoys”.
Furthermore, the FSC said it saw a role for the Australian Securities and Investments Commission (ASIC) in overseeing such a practice.
“We would like to see ASIC play an important role in this process to ensure that, on balance, customers are better off as a result of the rationalisation,” it said.
“This would be a requirement that the provider initially conducts the assessment with oversight from ASIC,” the FSC said.
The answer said that if a reinsurer was involved, independent actuarial advice would be required prior to the action that confirmed reinsurers were not materially impacted by product rationalisation and if so, they would provide consent to the change.