AIA chief executive Damien Mu believes the life insurance industry hasn’t been valued enough by successive governments, but the sector will benefit from positioning itself better during this generation of retirement reforms.
Speaking on the final leg of the AIA Adviser roadshow in Sydney on Wednesday morning, Mu told advisers in the room the insurer will re-position itself as part of the retirement solution rather than being removed from it.
“It’s been a bit of a mission,” Mu said.
“I have a real grudge that life insurance wasn’t valued the way it should be by people in positions of government.
“When I was thinking about all the changes that need to be made and things we weren’t doing or could do better, I was really angry about that.”
Mu said he was trying to advocate for how important life insurance is when it comes to supporting society and the economy.
“I was banging the drum,” he said.
“We had some success – collectively in the industry, not just me. What I realised is maybe I was banging the drum loudly, but not necessarily the right one. What I mean by that [is] we’ve got to step back now and think about how important it is that we talk about how we help resolve the macro-economic issues the government are trying to deal with.”
The miscalculation of previous advocacy, Mu said, was trying to set up a different path for life insurance, which was alongside retirement, aged care and healthcare, rather than how it functions collectively.
“Let’s not try and create another system,” he said.
“How do we integrate ourselves in the value of those systems from an economic policy setting?
“All of a sudden you can see a significant difference in terms of the reception we’re getting.”
Mu said he was proud of the work being done by the Council of Australian Life Insurers (CALI) – the breakaway advocacy group that included insurers from the Financial Services Council – and the Financial Advice Association on advocating for insurance and advice.
Retirement gap
Super funds have struggled with creating a retirement solution for members as required by the Retirement Income Covenant. Mu said issues around retirement or aged care won’t be solved without retirement or longevity solutions.
He added there was plenty of these products in market, but advice played a crucial role in making sure they are being properly utilised to maximise the benefit for clients.
“We’ve got some of the best products in the world,” Mu said.
“We’ve all seen longevity and annuity products in Australia, but what’s missing? It’s advice.
“We can’t help you solve those problems without advice. If I’m 55 and heading into retirement with $250,000 and you send me a letter saying ‘would you like a deferred annuity’, [do] you know what I’m going to do? I’m in the industry and I still don’t know.”
But Mu said the benefits of an adequate supply of product is offset by the lack of advisers working as intermediaries for members.
“What has dropped now, unfortunately, through seeing the impact of the number of advisers leave the market [and] the impact of the regulatory changes that have stopped us from being able to serve Australians, has been this widening gap of protection and advice to solve the issues our government and our country are facing,” Mu said.
The government announced insurers and banks would benefit from its Delivering Better Financial Outcomes package – the suite of reforms based on the government’s Quality of Advice Review response.
Mu said there needs to continue to be strong advocacy from the FSC, FAAA and the rest of the industry to make sure legislation is delivered.
“Products don’t get off the shelves by themselves, it’s just the truth,” Mu said.
“There’s no market in the world that has been able to successfully sell digital life insurance. There isn’t.”
In today’s world of accelerating choices, what has not changed in Australia, is the belief that bad things happen to other people and therefore I will not suffer the same consequences.
Countless times over the last 37 years since I became an Adviser, I was amazed at how passionate people became about the need for Life and Disability Insurance when a family member or close friend died or due to illness or disability, could no longer work and their income ceased with the end result of loss of savings, assets and even their home, though that epiphany would quickly wear off when other important things popped up to distract them.
Life Insurance is not a “happy, feel good” impulse buy and the facts have ALWAYS been that people need help with their Wealth Protection needs to get them over the line, or they simply forget, or put it into the future tasks list that grows longer each day.
I have seen young families lose their homes due to having insufficient Life and Disability Insurances and the fact that the Government enacted and forced Life Insurers to cancel policies without making it a simple task of first ringing those people to ask them if that is what they want before cancelling, though, as is always the case with our Legalize phobia that now means everyone is sent thousands of words written in jargon that causes the recipient to forward the correspondence to the delete file, or “read later” file that never gets read.
Damien is correct in what he said about the Government not understanding the importance of proper cover for all Australians, though as a very intelligent and articulate member of Parliament told me years ago, if you want to get things changed, keep your arguments short, sharp and straight to the point in plain English, with the failings and the solution, as members of Parliament do not understand your Industry and your Industry is just one of hundreds that are also banging on their doors trying to get their points across and when you throw in the multi-million dollar Lobby groups who throw money around to gain favour and a seat at the table, then your story needs to cut to the chase or it will, like so many others, be filed in the “Read Later” basket and never see the light of day again.
The Life Insurance Industry and even our representative bodies for years made the same mistake over and over again, by sending war and peace thickness submissions that were NEVER read in full and ignored the sage advice of that respected member of Parliament, which led to the total fiasco that the Life Insurance Industry has now faced for years.
My short and plain English piece of advice, is that the current framework is NOT working and will NOT get better until Advisers who can create the required Billions of dollars in revenue to rebuild the Industry, are given sufficient incentive to start and stay in the Industry without the current inane road blocks that are driving risk writers away.
The irony of everything that has occurred, if what has been done, had first been written on a whiteboard, the argument put forward, then enacted by Government, was 100% the opposite of their stated objectives, which means we either have a big problem articulating, or vested interest groups with no responsibilities for their actions, won the day at ALL OUR EXPENSE.