Speaking exclusively to Risk Adviser, risk specialist and AFA state director Dave Slovinec said that while a lot of consumers have some default cover in their superannuation, they also need to understand what they have and how they are protected.
“The underinsurance issue in Australia is a massive problem,” Mr Slovinec said.
“There’s a massive opportunity out there to get the word out about the importance of Australians getting insured.
“I think it’s making sure people understand what it is and what they’ve currently got.”
Mr Slovinec noted that the underinsurance problem is not about a lack of consumer desire for products, but about advisers educating consumers on insurance and showing them the benefits of having protection in place.
He mentioned the AFA’s efforts around its Your Best Interests program in educating consumers about the importance of getting advice.
“It’s not the first thing that people think of. It’s not at the forefront of their thoughts, especially when you’re young and starting out,” he said.
“That’s part of the Your Best Interests piece that the AFA has put around the consumer education around why it’s important to get advice and why you should speak to a financial adviser at any stage in life – from the beginning of your journey in employment right through to any life stage, from getting married and having children, [to] then one day being able to retire and live comfortably.”
Consumer and public education regarding the need and the potential benefits of quality personal risk insurance is paramount in relation to tackling the underinsurance issue.
The major issue that is not being addressed here is that in an FSC media release on 6th November, 2015, in relation to the proposed Life Insurance Reforms, the Financial Services Council Director of Policy, Andrew Bragg, stated “In the longer term, we believe MORE REFINEMENT will be needed to improve consumer outcomes” and “As the financial advice profession matures, we EXPECT ALL FINANCIAL ADVISERS to move to a fee-for-service model”.
He also stated “these reforms must be implemented in a way which ENCOURAGES the transition”.
Advice is not a short term proposition, but it is blatantly obvious the FSC’s horizon to manipulate and push for the eradication of any risk insurance commission payment of any kind and at any level, is very short indeed. In fact, on several occasions, the FSC have openly stated they welcome the ASIC review in 2018 and when you read the above comments and read the full FSC submission to Trowbridge, you will clearly understand why they are very impatient and very anxious to have wholesale change implemented as soon as possible, irrespective of the detrimental effect it may have on the IFA’s and consequently the major underinsurance problem in Australia.
Change in any industry is inevitable, but if anyone truly believes that the consumer will be the beneficiary of a legislated fee for service remuneration model for risk insurance advice in 2 years time, then they had better think again and very soon.
Adaptive change is not an option if the cost of accessing both advice and insurance product have just increased by 50% in 2018.
Any takers on what that outcome would do for the current underinsurance problem?
I agree with Melinda, There is nothing in the LIF legislation that has any identifiable value for consumers. But the Banks will benefit enormously, adding to their already record bloated profits. The LIF squarely targets the viability of the IFA s who write the majority of life insurance in this country. The banks have a carve-out in the LIF for direct insurance sales, which have an appalling lapse and claims payment record. The FSC put that carve-out in the LIF for mercenary commercial reasons to wipe out IFAs and fill the void by flogging their high margin, low claim paying direct products . The only way to address the crippling under-insurance problem in Australia is though non-bank advisers being fairly remunerated to give good non-conflicted advice to consumers about the real options for protecting themselves against life’s real risks.
Great article Dave. Advisers need to continue to focus their attention on educating consumers and mainstream media to the benefit of insurance and the protection it can provide to their families and business structures. Its about looking at adaptive change and taking advice beyond the horizon rather than focussing only on the immediate concerns. Advice is not a short term proposition. Keep up the great work in South Australia
And yet LIF is going to create a greater under-insurance problem. I hope the AFA (and FPA) is lobbying politicians with this under-insurance information. I have seen strong representation by the LICG on this issue, but not so strong from the others.
And the problem is not just about “advisers educating consumers in insurance….” it is about Government, ASIC and the Media starting to be a bit positive about the value of advised, appropriate personal insurance cover, and not slamming everything the advice community does.