In its submission to the life insurance inquiry, the FPA said LIF adds significant cost pressure to the adviser through declining revenue combined with rising compliance costs due to the Future of Financial Advice (FOFA) reforms.
“This cost burden falls disproportionately on small businesses, particularly small financial planning firms that are less likely to be able to bear the cost of reforms, especially in the face of large institutional life companies who can cross subsidise the additional cost burden,” the submission said.
“We would therefore encourage consideration be given to policy settings which may provide cost savings to consumers who seek out life insurance advice through a professional financial planner.”
The FPA also recommended to the parliamentary joint committee on corporations and financial services that it consider “defining a standard for describing product features”, as well as the “use of standard definitions in product contracts and descriptions”.
“We believe the principle should be that insurance products are easily comparable,” the submission said.
“Under the current regulatory settings, it is significantly difficult and costly for financial planners to comply with the product comparison requirements under the FOFA best interest duty, to the detriment of consumers.
“These considerations would make it significantly easier for consumers and their advisers to compare products to allow the selection of the most appropriate product to provide risk cover for the consumer.”
Further, the FPA said in its submission that a standardised medical request form should be developed that can be shared across insurers.
This will better assist consumers in getting medical exams and obtaining cover, the FPA said.
