Australia’s largest life insurer TAL recommends in a new submission to the Financial System Inquiry a range of measures to improve consumer outcomes for life insurance products and services.
TAL Group CEO Jim Minto said: “We are seeking changes to allow consumers to have greater flexibility and ease to both obtain and maintain financial protection, and to enhance their confidence by improving various standards.
“While the FSI Interim Report noted that the Inquiry would investigate further Australia’s life-underinsurance problem, what TAL is seeking are changes to help address underinsurance so that people can have the right amount of financial protection they need.”
Mr Minto said life insurance plays an important role in society by helping people financially when they are unable to work due to sickness and injury as well as the families and beneficiaries of those who die.
“Life insurance not only protects the lives people have already created but it protects the future they imagine. To do this we are seeking strong consumer protection and regulatory oversight, enhanced advice delivery and effectiveness, and to give consumers access to more innovative and contemporary products that better meet their needs via the technology they are using today and in the future.”
Key fact sheet
TAL is seeking a requirement for a “key fact sheet” (KFS) to be provided to each prospective customer of life insurance. The fact sheet would be a standard format to be used by all life insurers so all prospective customers would be provided with concise, relevant information about the type/s of life insurance they are seeking. A requirement to provide a KFS has already been introduced for home loans and credit cards as well as home and contents insurance policies.
A key fact sheet enables consumers to compare products simply and helps to make it easy to understand what can sometimes be complex products. For life insurance in particular, these fact sheets should compare stepped and level premiums so consumers better understand the costs involved over the longer term.
Enhance ASIC powers
TAL supports providing ASIC with additional product intervention powers to improve consumer confidence where necessary. An example is eliminating stepped premiums from funeral insurance products where the customer has income-tested government benefits or fixed incomes. The reason TAL is calling for this is because stepped premiums – which rise over time unlike level premiums – can eat into fixed income and over time become less affordable. This has been an ongoing issue for consumer action groups.
Higher advice standards
TAL believes strongly in the value and importance of advice for Australians. Life insurance is often provided via advisers who can ensure that Australians have appropriate levels of cover to meet their individual needs. TAL strongly supports measures to lift adviser standards, via mandatory certification, minimum university education qualifications, a national register and ongoing training. Until standards improve and financial planning becomes a profession, planners will continue to be viewed poorly by the public. TAL continues to promote increasing standards of the advice industry, and has actively promoted this view through its own advice group Affinia Financial Advisers.
Enhancing access to low-cost advice
TAL supports the use of scaled advice – or limited advice – as an appropriate middle-ground option to help consumers receive the level of advice they both want and need. To help consumers navigate through the different forms of advice that is available, advice labels should be renamed to provide greater clarity. Specifically, general advice should be renamed Product Information, scaled advice renamed Product Advice while Personal Advice (or full advice) should remain unchanged.
Allow life insurers to give consumers products and services they want
The regulation of all insurers should be aligned to the greatest extent possible and regulations should be changed to allow life insurers to provide ancillary benefits or ‘riders’ to consumers where only general or health insurers can currently provide those benefits. An example is life insurers currently cannot pay for the medical treatment of a customer. In short, life insurers are prohibited from offering benefits that resemble general insurance or private health insurance. TAL believes underinsurance can be improved if flexibility in the regulatory framework is improved to allow insurers to develop innovative products and offer a greater range of benefits to consumers.
Mr Minto said: “TAL would like to thank the FSI for the opportunity to contribute in helping to reshape the financial system so that it can be more sustainable and deliver better outcomes for consumers and our society. As Australia’s biggest provider of life insurance in all its forms, TAL is determined to focus on the needs of our customers and consumers because we are passionate about the role that life insurance plays in society.”
Stuart Snell 02 9448 9879/0417 921 235 firstname.lastname@example.org
About TAL: The specialist voice of life insurance in Australia
TAL is Australia’s largest life insurance company with leading competitive offerings in each of its core distribution channels: direct to customers; through financial advisers; and via group and workplace superannuation schemes. With in-force premiums of $2.2 billion, TAL provides more life insurance solutions to Australians than any other insurer. TAL is owned by The Dai-ichi Life Insurance Company, Limited, one of Japan’s largest life insurers.