FSC outlines pre-election priorities for life insurance, advice – Life Insurance – Insurance News
The Financial Services Council (FSC) has released a report outlining its policy priorities including for life insurance and the advice sector ahead of the federal election, which is widely expected to take place in May.
FSC says in the Policy Priorities report that it hopes the next parliament will work to ensure that each part of the life insurance industry is supported, along with the financial advisers and superannuation trustees that work alongside insurers.
The peak body says it supports policy settings that ensure life insurance is accessible and affordable now and into the future; provide all employed Australians access to simple, great value life insurance through their superannuation; and promote high standards of customer service with meaningful consumer protections.
FSC says the Life Insurance Framework (LIF), which is currently being examined by Treasury as part of its Quality of Advice review, should be retained.
LIF commenced in January 2018, ushering in a number of changes such as maximum commission caps and mandatory clawback within the first two years of a policy.
FSC says it believes LIF has improved consumer outcomes by reducing the misaligned incentives and inappropriate policy replacement disclosed in an Australian Securities and Investments Commission report on retail life insurance advice.
The peak body also touched on group insurance in the report, saying life products offered via superannuation have been a successful policy for Australia.
“It provides a safety net to millions of Australians who would have otherwise not chosen or been unable to take out life and disability insurance individually,” FSC said.
“Group insurance in superannuation is fundamentally the right policy setting for millions of Australians because, when provided to members on an opt-out basis, it significantly helps combat the problem of underinsurance in Australia.”
However, there are areas for improvement, such as making sure all members who are paying for insurance can rely on their cover if they need to claim.
FSC says it has addressed this by implementing an enforceable standard which will remove occupational exclusions and occupation based restrictive disability definitions in default life insurance cover in superannuation. The enforceable standard comes into full effect from January next year after a one-year transition period.
In relation to financial advice, FSC wants the so-called Safe Harbour steps for complying with the Best Interest Duty rule abolished.
“Removal of the safe harbour steps should be the first priority of the Government to enable a principles-based advice model under the existing regulatory framework,” FSC said.
“The steps impose specific obligations on the provision of personal advice that must be followed to meet the best interests of the consumer.
“In practice the safe harbour steps have resulted in a system where meeting the Best Interests requirement has become a ‘tick-box’ exercise.”
FSC also wants the statement of advice requirement replaced with a letter of advice, one that comes with scalable obligations to enable less paperwork for consumers and less time taken to prepare it while ensuring advice is better understood and more specific to consumer needs.
Click here for more from the report.
