Report shows financial planning industry has work to do on life insurance, group insurance remains strong
22 April 2020
Insurance lawyers have welcomed an ASIC and APRA report released this week into life insurance and the claims handling process, saying the report reinforced the superior value of group insurance through super.
Maurice Blackburn Superannuation and Insurance Principal Josh Mennen said the report had shown group insurance continued to have a key role in delivering value and strong outcomes for consumers, particularly when compared to policies sold by financial advisors.
“This report has some very compelling data that makes clear that group insurance through super remains a crucial product that delivers significantly greater value for consumers than other policies, including those supposedly tailored by financial advisors,” Mr Mennen said.
“The data shows that the claims paid ratio – the dollar amount paid as a percentage of annual premiums - for super total and permanent disability insurance was 85 per cent, compared with 45 per cent when sold by financial advisors.
“It also shows that income protection through super led to just 33.7 disputes per 100,000 people insured, compared to retail income protection policies, which came in at a staggering 150.5 disputes per 100,000 people insured.
“This reinforces that while advisor-sold policies are often marketed as a bespoke product, too often they are compromised by conflicts of interest, including insurers paying trailing commissions that result in poor product selection and claim disputes caused by underwriting complications.
“The financial planning industry must explain why, based on this data, consumers appear to be worse off when they consult a risk advisor?
“It also must outline how it is going to ensure insurance recommendations are genuinely in consumers’ best interests in order to win back public confidence.
“While there is still work to do on group insurance with respect to use of Activities of Daily Living (ADL) definitions, overall this report is a positive story for group insurance, with acceptances up and claims times going down.
“This is key given group cover through super is how most Australians are insured, something that will continue to become more important as we move through the COVID-19 crisis,” he said.