The Association of Financial Advisers (AFA) has made a submission to the Financial Services Council (FSC) calling for it to make substantial improvements to its draft Life Insurer Code of Practice, even if it means delaying implementation beyond the announced start date of 1 October.
The AFA’s submission proposes 29 recommendations and is supported by more than six pages of verbatim comments, concerns and suggestions from its members.
AFA chief executive Brad Fox said the draft code needs substantial improvements before it can deliver on its promise.
“It should drive an insurer culture of seeking genuine new business and, as such, help address Australia’s underinsurance problem, rather than perpetuating an insurer culture which tries to attract existing policyholders away from other insurers,” Mr Fox said.
“It is not good enough to simply say this code is a step in the right direction and can be further improved later through future reviews because in fact, as it currently stands, it falls far too short.”
Mr Fox added that, while the AFA has been calling for the code since November 2014, the current draft will not win back the social licence lost by insurers through recent claims and other issues.
“Restricting the code to setting out practice standards for insurers in relation to underwriting and claims management does not go far enough in addressing the cultural issues and sales practices that work against consumer interests,” he said.
“The code needs to also impact the organisational behaviours that unreasonably conflict an adviser in their best interests duty and induce inappropriate replacement advice.
“This means the code must contain commitments to advice professionals as well as to consumers.”
Mr Fox said the wider community expects insurers to act responsibly when discharging their duties.
“A fully prepared code would represent a catalyst to form a new culture within insurers, one that positions consumer health and wellbeing alongside sustainable financial performance and therefore restores the social licence granted to life insurers to protect Australian families when they are at their most vulnerable.”
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