Scott Haywood, Presenter: Still to come as we scramble to understand the new financial advice changes made by the government, life insurers are looking to get a piece of the action. We were all for the new changes to financial advice made by the government, but what was limited in their actions were supporting similar moves for banks, insurance, and life insurance companies. Minister Stephen Jones argued that it was easy for the government to ease restrictions on super funds providing advice as they were under a legal obligation to provide best interest advice to their members. However, other players in the financial services industry have put their 2 cents in, and not surprisingly, they reckon they also operate in the best interest of their clients. One of those pushing back is the life insurance industry, which is now urging the government to allow more freedom for their businesses to provide advice to customers. The Council of Australian Life Insurers, which represents that industry, said while it was supportive of the government’s proposed reforms, life insurers should be able to provide limited advice. Given the government spent millions on a royal commission into misconduct into financial services to tidy the industry up, now all of a sudden, the floodgates could be open. The CEO of the Council of Australian Life Insurers is Christine Cupitt and she joins me this evening on Money News. Christine, great to have you on the show.
Christine Cupitt, Council of Australian Life Insurers CEO: G’day Scott, it’s lovely to talk with you tonight.
Scott Haywood, Presenter: Christine, you said the announcement was a good start, but said more needed to be done. What more needs to be done?
Christine Cupitt, Council of Australian Life Insurers CEO: So, as a country, we need better financial outcomes for Australians and families, and that means addressing the unmet financial advice needs of working Australians. The life insurance industry wants people to have the information and advice that they deserve to make informed choices about their future, and also to address the growing problem of under insurance that is leaving people unprotected when times get tough. What we’d like Australian consumers to have access to is a range of options to receive advice about their life insurance needs. We think that financial advisors play a critical role in providing more holistic financial plans. We believe that superannuation fund trustees can do [00:02:00] a great job and provide a lot of support to their members around financial advice, but there are circumstances where people and families would benefit from direct support from their life insurer. And we want to make sure that these reforms enable that for, for Australians.
Scott Haywood, Presenter: So, we have an enormous underinsurance problem in Australia. Would your proposal Christine reduce that problem?
Christine Cupitt, Council of Australian Life Insurers CEO: So, our proposal is focused on our customers and their families and what they need. So more important than anything else, it’s about giving people information to make a choice about the level of cover that they want and need for their family. That could result in people having more cover. It could result in people having different levels of cover. So really what we’re about is standing in the shoes of the customer and making sure that the system is set up for them to navigate easily and obtain the life insurance that they need.
Scott Haywood, Presenter: Do you think a super fund advisor should be qualified to give advice on insurance when they are already limited in the advice they can give?
Christine Cupitt, Council of Australian Life Insurers CEO: So, superannuation fund trustees operate under quite a strict legal framework, which includes being competent to provide the services that they give their, their members. So, each superannuation fund trustee would take that very seriously and take that into account in designing the advice support that they give their members.
Scott Haywood, Presenter: You are arguing that life insurance should be allowed to provide limited life insurance advice, but isn’t life insurance a big part of the whole financial advice process? Like you have to talk about budgeting goals and objectives, debt levels, education costs, and the list goes on.
Christine Cupitt, Council of Australian Life Insurers CEO: Absolutely. Life insurance is critical to Australian families. It’s linked directly with people’s decisions around having more, more children or taking out a mortgage. And it is important in assessing somebody’s life insurance needs to understand enough about their family circumstances and their debt levels to give them the right information. Our proposal does mean that the right level of consumer protection is there in the way that the advice is provided, but again, it’s about choice. Consumers should have the choice to see a financial planner for a much more holistic financial plan, but they should also have the choice to receive more limited advice, and we can’t have Australians waiting in line and paying on average over $3,000 for a financial plan when life insurers are standing ready to provide that kind of support in a more limited way to their customers.
Scott Haywood, Presenter: Finally, Christine, fully qualified financial advisors generally charge a fee for service, whereas insurance advisors and firms earn a commission. So, what happens to the advisor if the insurance product is a life insurance zero commission product? And what happens to the applicant and the advisor if the insurance is declined? How does that insurance advisor or that insurance company get paid?
Christine Cupitt, Council of Australian Life Insurers CEO: So, there’s a range of issues that are relevant to that. Importantly, if advice is being provided by the life insurer, they’re likely to be somebody employed by that life insurer and would have remuneration arrangements that are consistent with an employee. Through a financial advisor, there is a regulated framework for paying those financial advisors. And of course, the Levy Review has made recommendations about clarifying the way in which superannuation fund trustees can provide for this kind of advice. So again, it does depend on the channel, but ultimately, it’s less about how people in the industry are being paid and much more about enabling customers to get advice that suits them through the channel that they need at that point in time.
Scott Haywood, Presenter: Christine Cupitt, CEO of the Council of Australian Life Insurers. Thank you so much for joining me on Money News.
Christine Cupitt, Council of Australian Life Insurers CEO: Thanks, Scott. Thank you.