Survey turns up insurance negligence

The shadow shopper survey on superannuation advice has revealed a “surprisingly” low percentage of consumers received life insurance advice although, according to industry experts, the responsibility lies on more than just the advisers’ shoulders.

The Australian Securities and Investments Commission’s (ASIC) investigation found that only 21 per cent of the consumers who participated in the shadow shopper exercise were given advice about life and disability insurance.

But despite acknowledging that this result was “very worrying”, Tower retail life insurance chief executive officer David Callander said the entire industry, including the regulators, insurance providers and consumers, were accountable for Australia’s insurance gap.

“The lack of advice is worrying…but what needs to be done is to raise the whole level [of insurance advice],” he said.

“This involves a two-pronged attack by working with advisers and insurance providers, and educating consumers.”

The Investment and Financial Services Association (IFSA) researched the extent of this gap last year and found that 60 per cent of those with dependent children did not have enough life insurance cover to look after them for more than one year if they were to die.

IFSA chief executive Richard Gilbert is encouraging insurance providers to enhance their marketing strategies in order to increase consumer awareness of the importance of risk protection.

He said that it was difficult to comment on the shadow shopper findings regarding insurance because the results did not give enough detail as to the individual situation of each of the consumers involved, who perhaps might have already had adequate insurance cover.

An ASIC spokesperson confirmed that the statistic did not take into consideration individual consumers’ circumstances.

She added that “advisers are not necessarily obliged to provide advice about life and disability insurance in the context of advice about superannuation”.

“However, we would suggest it is good practice for advisers to consider insurance issues as part of their recommendations to clients on superannuation, or at the very least, advise the client this is something they should explore themselves, even if they don’t make a specific recommendation.

“Failure to follow this good practice might leave an adviser exposed to a negligence claim.”

Association of Financial Advisers chief executive Richard Klipin said he found the shadow shopper revelations regarding life insurance to be of concern.

“At best there are people providing good advice and at worst there are people not providing any at all and, if one in five aren’t getting any advice, it’s a concern,” he said.