The Council of Australian Life Insurers is calling on the government to expand the type of advice life insurers are allowed to provide to their customers, as Minister for Financial Services Stephen jones prepares to announce the next stage of Quality of Advice Review reforms.
The Delivering Better Financial Outcomes packages – the government’s title for the post-QAR reforms – included expanding financial advice capabilities for super funds but not for other institutions, like banks and insurers.
Jones hasn’t officially closed the door on other institutions giving advice – banks and insurers are part of “Stream Three” of the QAR reforms, and he has said he would give an official government position by the end of the year. He announced the first draft legislation for the reforms last month.
The peak life insurance industry association’s position is backed by research commissioned by the association and conducted by 89 Degrees East which found more than 90 per cent of Australians are satisfied with the service they receive from their life insurers directly.
CALI chief executive Christine Cupitt says the association proposes that life insurers be permitted to provide limited advice on their own products to people who ask for it.
“This is so important because in making those decisions about life insurance, we want to give people piece of mind,” Cupitt tells Professional Planner.
“Life insurers, like anybody else, could provide holistic financial advice… but in order to do that they need to implement all the compliance arrangements the financial advice profession implements.”
While advisers struggle to write risk advice in the current regulatory environment, the CALI research found only 6 per cent of Australians receive financial advice on life insurance due to it being too inaccessible and expensive.
Cupitt says the research shows customers just want someone to talk to because navigating decisions about insurance is complex.
“You’ve got 30 per cent of people that are eager to obtain professional support but just 6 per cent are getting it,” Cupitt says.
“Something’s not right there; it doesn’t add up. We are wanting to work with the government on an arrangement that will allow more flexibility for life insurers to provide the kind of information, support and help that Australian customers expect from their life insurers.”
Cupitt says the association wants to avoid having customers waiting for advice that can cost an average of $3500 to have their insurance needs met.
“We stand ready to support our customers with more simple and limited inquiries about their life insurance needs,” Cupitt says.
“We think that’s an important part of the puzzle to bridge the gap between the appetite people have for getting professional support and what’s actually available to them.”
However, Cupitt acknowledges the need for guardrails around advice delivered by insurers, including requirements for minimum education standards, quality assurance by licensees, ethical standards, and adequate monitoring and supervision.
She adds that enforcement should come down to the corporate regulator.
“Doing the right by our customers is central to this proposal but we know that community expectations are that any standards like this would be appropriately enforced,” Cupitt says.
“We anticipate the government’s framework would allow ASIC to review, monitor and enforce the requirements that will be set out in the law.”