Further life insurance reform required: AIOFP

In a submission to the Senate Economics References Committee: Scrutiny of Financial Advice, the group raised several concerns, including a need for further reform and oversight in the life insurance industry.

"There is insufficient oversight, however, of that part of the industry in which life insurance is distributed to the public without the benefit of an effective intermediary to provide advice and therefore to enable consumers to make an informed decision," AIOFP said.

"There is insufficient oversight of the provision of life insurance provided by life insurers offering group coverage through, say, superannuation funds, where the quality of the covers provided is poor, thus leaving consumers with inadequate financial protection in the event that a tragedy should occur."

AIOFP believes ASIC's focus should widen to address "the serious inadequacies" of life insurance distribution and product design. The group also took issue with the inquiry's title – Scrutiny of Financial Advice – arguing that it unfairly points issues to allegations of poor advice. 

AIOFP added that it is of the view that life insurers "do engage in unethical practices to avoid paying claims". Further, it believes a life insurance code of practice, which is being developed by the FSC, is not required.

"In 1996, ASIC introduced a code of practice governing life insurance agents. This was removed in the financial services reform changes but has been strengthened by the requirements of the Corporations Act and Regulatory Guides and further augmented by the best interests' duty," the submission states.