In a letter to the directors of major insurance companies released on Monday, ASIC said it expected life insurers to go beyond provisions in the industry code of practice when dealing with consumers facing financial stress.
“ASIC expects insurers to consider, where appropriate and reasonable, reviewing options for premium ‘holidays’ or deferrals for consumers who are no longer able to pay premiums due to reduced income,” the regulator said.
“We recognise that some insurers introduced this type of flexibility in response to the tragic bushfires of summer 2019-20, and we consider a similar approach is just as important now, given the broad effect that the COVID pandemic is already having on many Australians.
“We expect insurers to try to find workable options to allow consumers in hardship to continue their cover.”
ASIC said it might not be “fair” for insurers to wait for their customers to approach them about hardship provisions, and that life insurance companies should consider offering benefits that kicked in automatically to assist vulnerable policyholders.
“Consumers who are struggling to pay their insurance premiums may simply allow the policy to lapse rather than contact their insurer to cancel it,” the regulator said.
“If an insurer relies on consumers to contact them to discuss options for retaining their cover, this can result in inconsistent and unfair outcomes for policyholders.
“Vulnerable consumers will be under considerable stress – accordingly, for some benefits to be effective they may need to take effect automatically, without the need for any action by the consumer.”
ASIC also said insurers should be flexible when it came to the usual requirements needed to lodge a claim, such as requiring the claimant to be assessed by a specific medical professional.
In addition, if consumers were likely to face exclusion from an insurance claim as a result of specific clauses in their policy, such as those related to a minimum number of work hours, or a broad pandemic exclusion, these needed to be clearly communicated on the insurer or the relevant super fund’s website, the regulator said.
The letter emphasised that directors would be responsible for liaising with company boards to ensure these conditions were being met.
The news comes as the major life insurers are set to be scrutinised in today’s Senate economics committee insurance hearings.
t’s really working ASIC – AIA suggest clients can save by paying an annual premium instead of monthly (i.e pay more now when they are in financial hardship) or covert to level premiums (i.e. pay more now) or churn the clients cover to AIA for some new business discounts. Its such a stupid email its not even funny.
Here’s a copy of the email below:
At AIA Australia, we understand that clients have various every day expenses, creating a need to keep an eye on their budget. From paying for groceries, maintaining mortgage repayments, child related expenses and many more. Providing your clients with various options to help minimise cost and maintain their insurance cover is something AIA can help with.
WHAT ARE THE OPTIONS?
Premium payment basis – paying premiums once annually is a more affordable option because your clients avoid paying frequency loadings of up to 8% for premiums paid monthly or half yearly.
Premium Structure – structuring your client’s policy with a long term view provides additional options. For example, whilst Stepped premiums are cheaper than the alternatives in the first year, over the long term, other premium structures could be cheaper. AIA Australia provide clients with three additional premium structure options, these are:
Level – True level premiums offer a cost-effective way for your clients to save on their premiums over the long term. The best part about AIA’s true level premiums, is we calculate benefit indexation increases based on the client’s age at the time the cover commenced, not at their age when the increase applies.
Term Level – Term Level allows your clients to keep their premiums level for a pre-determined period of 5, 10 or 15 years before their premiums covert to stepped and at which point they also receive a loyalty discount. This premium option is ideal for clients who have specific financial needs with known fixed terms, enabling you to match the right premium pattern to your clients’ needs.
Optimum – gives your clients the option to have the upfront cost effectiveness of stepped premiums with the consistency and longer term savings of level premiums.
Superannuation rollover monies – using their superannuation rollover monies to pay for their policy. The benefits of using super rollover monies is that your clients won’t have to budget for their policy via their available funds, therefore keeping their policy in place if the unfortunate were to happen. Furthermore, the policy premiums are paid by using pre-tax income.
Becoming a non-smoker – if your client currently holds an AIA Priority Protection policy, was accepted on smoker rates and has quit smoking for over 12 months, they can complete a non-smoker declaration, which could reduce their premiums significantly.
Additionally, if you have clients with health or pastime loadings on their policies, reviewing those policies could result in cheaper premiums where the loadings can be removed due to health improvements.
Maybe ASIC should be checking if the person who sent this email is qualified to give advice. No different to real estate agents here suggesting clients use their super to pay for premiums when they have lost their income?
AIA version of helping. They forgot to mention increases to their level premiums and large upfront discounts and then year 3 massive hikes to insurance premiums, but hey, thanks for that info AIA
TAL 21 days for an amendment quote – gave up asking for it after 14 days…stopped counting after 21….
You try getting them to actually do this ASIC !!
TAL for example have imploded. Can’t get anything done in under 3 weeks. Call hold times 2-3 hours.
Very real. We have clients who have income protection policies that we are seeking (under the policy terms) to get a suspension of premiums for 6 months – you reckon we can get a response. we have been at this for a month – you cannot call them and getting a response on an email is almost impossible.
Who is “them”? Name & shame.