The Life Insurance and Advice Working Group’s interim report in response to ASIC’s risk advice concerns shows a “lack of imagination”, consumer bodies have argued.
In a joint submission by the Consumer Action Law Centre, Financial Rights Legal Centre, Choice and plaintiff law firm Maurice Blackburn, the life insurance advice industry is taken to task for not taking the possibility of fee-for-service risk advice seriously.
“The industry’s response shows a lack of imagination, it hasn’t considered moving forward without commission-based sales,” said Consumer Action Law Centre chief executive Gerard Brody, commenting on the joint submission.
“As long as there is a financial incentive for life insurance advisers to push certain products, there is little reason to think Australians will get advice that is prudent rather than profitable.”
Mr Brody said that charging a fee for life insurance advice would be a more pro-consumer remuneration model.
“Charging a fee for service is a much more transparent and ethical remuneration model. It would mean consumers will know how much they’re paying, and will allow them to shop around for the broker with the lowest fees,” he added.
The consumer groups gave argued that the life industry should develop a code of practice and a “standard cover option to help simplify policies” as well as improve disclosure and “end stepped premiums”.
The submission comes as a majority of advisers have indicated they believe commissions are an important tool in combating Australia’s underinsurance problem.
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