Richard Dunkerley from Zurich, NMG Consulting's Ashwin Field and CoreData's Andrew Inwood

The Australian insurance industry needs to become more accommodating to consumers looking to dial up and dial down their insurance policies according to Ashwin Field, a partner at insurance and investment specialists NMG consulting.

Speaking on a panel at the Professional Planner Risk Advice Summit in Sydney, Field said the current models offered by insurers are too clunky for people looking to “glide” up and down between levels on the insurance spectrum.

“We need choice and flexibility mechanisms to trade up from base cover in group into voluntary and trade back down through our life cycle,” Field said.

Within life insurance, specifically, he explained that products aren’t designed well enough to cater to changing life stages, and the need for people to move from one stage to another. There should be policies with more emphasis on the ability to “glide” up or down from one life stage to the next.

Without these glide paths, inappropriate cover and underinsurance emerge if the transition isn’t catered to.

“We should really be concerned about the reality of emerging entry level protection gaps,” Field said.

Australia is “rapidly” heading into a market where the choices for customers looking to trade up from a group system into levels of voluntary cover that match their life stage is declining dramatically. Less choice means less appropriate cover, with more people having to settle for whatever coverage is available. “So that’s a worry,” he added.

The impending review of insurance advice remuneration methods could exacerbate this issue. If commissions – which are already capped by the Life Insurance Framework – are banned as a result of the forthcoming ASIC review in 2021, and consumers are asked to pay upfront for advice, advisers fear they will be more inclined to buy off-the-shelf policies that are less appropriate for their needs.

In other words, Field said, we should be concerned about “declining support for informed decisions on calibration” with regards to general and personal risk advice.

The NMG partner was joined on the panel by CoreData chief executive Andrew Inwood, who said that the focus on remuneration – as opposed to more tailored advice – could lead to a decline in the number of claims being processed and an increase in the number of people getting “accidentally insured”.

“When the number of horror stories about what’s happened to people has gone through the roof, then action will occur,” Inwood added.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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