The leading voice of life insurance in Australia welcomes the Federal Government’s initial response to the Quality of Advice Review (QAR) and urges the Government to ensure legislation better serves Australians through improved access to affordable life insurance advice.
With almost ten million Australians holding life insurance products through their superannuation, the Council of Australian Life Insurers (CALI) is supportive of the Government’s proposed reforms to allow superannuation trustees to provide advice to working Australians, including about life insurance held within their superannuation.
CALI believes it is important that Government legislation also allows life insurers to provide limited advice to Australians directly when they ask for it. Like superannuation trustees, life insurers have additional legal duties to act in good faith and prioritise the interests of their customers.
“Life insurers support people to make informed choices about their future so they can live in a healthy, confident and secure way over their lifetime. Life insurance protects workers and their families on their best and worst days,” said CALI CEO Christine Cupitt.
“This announcement is a good start but more needs to be done to help solve the unmet financial advice need for working Australians, not just those people approaching retirement. We must address the growing problem of underinsurance that is leaving people unprotected when times get tough,” she said.
“For many Australians, getting advice is too expensive or too inaccessible with just 16,000 financial advisers to turn to across the country. Of these advisers, there are just 1,000 who are helping people navigate life insurance products, which makes reforms for life insurance advice an urgent priority.”
Where a consumer does not wish to engage a financial adviser, CALI believes the law should enable life insurers to provide limited life insurance advice. This should only happen with appropriate limitations and strong consumer protections to ensure better outcomes for Australian workers and their families.
“Australians shouldn’t be waiting in line to pay $3,500 on average for financial advice, especially when life insurers want to be able to provide limited advice about their products to help people make informed decisions about protecting their future,” Ms Cupitt said.
CALI welcomes Assistant Treasurer Stephen Jones’ acknowledgement of issues raised in insurance and the Government’s willingness to work with the life insurance industry on potential reforms to include life insurers in legislative change on financial advice.
“We look forward to continuing our work with the Government to find a solution that gives more Australians access to life insurance advice by making it easier for life insurers to provide assistance and guidance about their products.”
CALI strongly supports the Government’s decision to remove red tape and improve transparency around the commissions advisers receive on products.
The life insurance industry is pleased to see that the Government is not ruling out the remaining eight recommendations from the QAR which have not yet been adopted and looks forward to hearing from the Assistant Treasurer on these before the end of the year.
“Life insurance gives working Australians peace of mind when they are making some of life’s biggest decisions. We’re here for life, in the good times and the bad.”
Background on life insurance in superannuation
Life insurance in superannuation is a critical safety net for Australians and their families. It provides a dignified and secure retirement for people who are not able to work through to normal retirement age due to illness or injury.
Group insurance through superannuation ensures most working age Australians have a base level of insurance coverage and the option to increase their cover within superannuation (subject to underwriting). Nearly 10 million superannuation accounts have some form of life insurance. ASIC has found that more than 70 per cent of superannuation accounts with insurance have the default cover automatically provided by the superannuation trustee. In many cases this will not be enough, particularly as a member’s needs change over their lifetime.
Many superannuation members could benefit from an advice conversation to help them better understand their life insurance needs and the options available to them. In some cases, this advice can be provided by superannuation trustees. However, not all life insurance is held in superannuation and consumers will continue to seek advice from other sources.
Consumers seek advice from both financial advisers and directly from their life insurers, particularly when they are seeking guidance to help them make a decision. Consumers rightly expect life insurers to help them make a choice about the products they offer. However, it is currently challenging for life insurers to respond adequately to these enquiries and avoid providing personal advice. Currently, many customers choose not to engage financial advisers because of cost and accessibility. The result is a frustrating and generally poor customer experience and in the worst of cases poor customer outcomes.