An LICG spokesperson told Risk Adviser that the basis behind the proposed LIF reform is the notion that advisers have been providing inappropriate advice, chasing commissions, and acting in their own interests instead of the best interests of their clients.
The spokesperson said the ASIC report shows that this is clearly not the case.
“The proposed LIF has been masterminded on the perception, and based on statistically irrelevant data that is not a true representation of the actual results the retail distribution channel provides to consumers,” the spokesperson said.
“It is designed to disenfranchise the retail distribution channel and drive consumers into direct and group channels which clearly provide poorer outcomes to consumers.”
Earlier this month, ASIC announced the findings of its industry-wide life insurance probe, saying there were issues of concern in relation to higher claims denial rates and claims handling procedures.
The report found that between 2013 and 2015, 7 per cent of life insurance claims on advised policies were declined.
By comparison, 12 per cent of claims through non-advised or direct policies were rejected, while 8 per cent of group policies were rejected.
The LICG spokesperson said that while there was always anecdotal evidence that direct and group distribution channels have had substantially higher claims decline rates than the advised channel, the data from ASIC review reinforces this point.
“I was shocked to see that claims from the direct distribution channel were 71 per cent more likely to have their claim denied, and 14 per cent more if you went through a group policy, than if you had gone through the advised channel,” the spokesperson said.
The spokesperson also noted their concern about direct policies, in particular their high lapse rates and poor sales practices, potentially leading to poor claims outcomes.
“It is common industry knowledge that direct policies can have over 50 per cent higher premiums than advised policies,” the spokesperson said.
“Not only that, they can come riddled with far-reaching exclusions that make it challenging to make a successful claim.
“Furthermore, the policies are generally underwritten at claim time, providing even less certainty for the customer when they need to make a claim on the policy.”
Unfortunately the truth is falling on death ears because of FSC corruption and AFA and FPA weakness.
Insurance is not about having a document in the drawer. It is about having claims paid if needed. Advised insurance is far more likely to have a claim paid, costs less and is tailored and more likely to be sufficient and cover what a person/family actually needs. Be covered, not just insured. Get advice.