Australia’s life insurers take responsibility for their part in the sector’s problems, including a lack of sustainability and poor consumer choice, says the head of TAL.
“We take our blame and our responsibility for our part in it…as a sector we must take responsibility. We need to make some changes, we’re not sure what they’ll be,” says Jim Minto, CEO of TAL.
“Life insurers have been heavily criticised over the last five or six years…around the way they have managed the sustainability of life insurance,” Minto says, also pointing out capital markets have been “very unhappy with life insurers”.
Planners aren’t the culprits
At the same time, however, he doesn’t believe financial planners should necessarily be blamed for the challenges being faced.
“Financial advice should not be a heavily criticised category. We must have consumer confidence in financial advice and life insurance advice…and if they do that, everyone will prosper.”
He also referred to another Financial System Inquiry (FSI) finding which implied there is a greater need for product providers to ensure products are fit for purpose for consumers.
“They’re saying product providers ought to have an obligation, to say that even though the adviser’s giving the advice, you [as insurers] need to be accountable.”
Minto says the regulator is absolutely focused on the importance of consumer confidence in the sector and good outcomes for customers.
“It’s been a culture of making products and selling them in those early years, rather than really trying to focus on what was right for the customer.
“So as we look at this working group and the FSI report…it’s really saying to us, ‘the quality of what is delivered to consumers is very, very important,” Minto explains.
He says in recent years, TAL has been trying to encourage its insurance industry peers to “find a way through this. There’s a whole pile of things…which have a lot of merit, and I think we should be investing in them.
“But we don’t want to collapse the market, we don’t want to reduce the availability of advice. That would be disastrous. We need to encourage the maximum amount of choice that a customer can have.”
Out of the blue
Minto believes insurance companies were somewhat shocked by the pronouncements against up-front commissions and flagging consumer trust in the sector made by the FSI report.
“It just showed up in the final report, so it ambushed everybody a bit. But having said that, the ASIC [life insurance] report came in late in the process, so that would have influenced it, but I was a bit surprised to see it in there,” he says.
Financial planning clients want freedom of choice rather than the “vertical silos” of solutions provided by institutions, according.
He sees growing consumerism as a major change impacting the life insurance space: “You’ve seen this materialise, with an exodus of senior executives out of life companies.”
“If you think about today, the government, opposition, the regulators and consumer groups are all concerned about the life insurance sector. This has materialised in a lot of pressure on life insurers,” Minto says.
In responding to the scrutiny the sector is facing, Minto says it is seeking to reposition in order to find a model that will be sustainable into the future.
“My personal ambition is that we should be trying to do it in a way that ensures sustainability and continuation of advice.”
