A former Zurich executive has accused life insurers of only being interested in profits, and not in making the necessary changes to protect consumers.
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.
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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