Speaking at the parliamentary joint committee on corporations and financial services life insurance inquiry in Melbourne yesterday, Synchron chair Michael Harrison, who was Zurich’s head of life risk from 1998 to 2003, said there are steps life insurers could be making to alleviate industry issues.
One of these includes moving from stepped to level premiums, he said.
“There are some changes to policy design I think we could make that would make a significant difference to the industry, but I don’t see any sign frankly of any insurance companies wanting to do that because it’s far more profitable not to,” Mr Harrison said.
Veteran risk adviser David Ward also told the committee that stepped premiums are “just a rip-off by insurance companies”, and noted the last client he saw in November last year as an example.
“He said that policy was sold to me three years ago, and he was watching it. He said the premium’s already way above what you quoted on the quote you left with me,” Mr Ward said.
“That’s what [insurance companies] do. They start the premium offloaded at the business, and then it’s open slather.”
Further, Mr Ward said insurance companies should be made to put their premiums on the back of their policy documents.
“That’s being honest. That’s being helpful to policyholders. They don’t, because they’re totally open then,” he said.
Meanwhile, AIOFP executive director Peter Johnston said life insurance companies have, over time, changed their focus from the best interests of policyholders to the best interests of shareholders.
“The most significant anti-consumer events over the past 20 years have been the life offices demutualising, thus changing their focus from policyholders to shareholders best interests – deciding to market directly to consumers via telemarketers, group schemes, internet sales and delayed underwriting tactics,” Mr Johnston said.
Thank you for reporting my comments. There were two specific issues that I raised to illustrate my comments about insurance company profits.
1. Consumers would be better off if ALL policies were underwritten at inception so that direct, group and superannuation policies could not be disputed at claims time due to “undisclosed” prior illnesses that the policyholder had not realised might be relevant. i.e. The “catch all” clause in these policies.
2. Consumers would be better off if insurers offered fixed-term level premium policies. For example, a five, ten fifteen or twenty year fixed term policy would cost less and would allow policy holders to “shape” their insurance to meet their needs. This would also avoid so-call lapses of yearly renewable term insurance where premiums become prohibitive at older ages.
At last, some REAL truths being aired. This sort of info is common knowledge among advisers but ignored by the mainstream press. Good on you IFA for writing about this. I know Michael Harrison and his word is gold – if he says it then it is. Easy to blame the advisers for perceived commissions abuse and churning when the life companies are happily facilitating all of it behind the scenes. Disgusting.
Agree. The FSC are ripping everyone off and the AFA and FPA have colluded in the corruption for the sake of funding and getting compulsory membership. The industry is in a very sad state and advisers are copping it. But the main corruption lies with the FSC, banks and insurers, the AFA and FPA
Banks and Insurers are the culprits and AFA did not defend nor took responsibility of
members “Best Interest”
I agree
change is needed!