A confluence of events has reduced the life insurance industry to a mere ‘blip’ on the radar, according to Simon Swanson, the managing director of ASX-listed financial services provider Clearview Wealth.
Delivering a statement at the house of representatives standing committee on economics recently, Swanson – whose group has circa $280 million in annual in-force premiums and $3 billion in FUM – pointed out that only around half the country’s eligible workers have income protection and life insurance levels “continue to fall” despite relatively high levels of household debt.
“In a few short decades, Australia’s life industry has unfortunately gone from a pillar of society to a small blip in financial services, despite offering products that are highly relevant to society,” Swanson told the committee.
The underinsurance gap has widened, he continued, as advice affordability has deteriorated.
“The industry must accept responsibility for its part in exacerbating the underinsurance problem,” Swanson admitted. “Complacency has led to under-investment, mismanagement and a lack of innovation.”
From a policy standpoint, however, Swanson made clear to the committee that over-regulation has played a role.
“Currently, the compliance burden on advice businesses and major changes to adviser remuneration under the Life Insurance Framework is driving up the cost to serve and, in turn, the price of advice. This has created serious unintended consequences for families, society and the government,” he said.
“Simplifying the way people buy life insurance would pave the way for digital solutions through both an adviser and directly which would provide greater access to the benefits of cover,” Swanson continued.
Apart from untangling the compliance knot for advisers, the managing director argued there were a number of ways policy makers could assist the industry get back on its feet.
“We maintain that people should be able to choose how they pay for advice – fees, commissions or a combination of both,” he said, noting that the the life insurance review has been combined with the government’s quality of advice review. “In addition, advice fees should be tax deductible.”