Insurers ask for equal footing to super funds in advice

The Council of Australian Life Insurers (CALI) and its member TAL have welcomed the minister’s response to the Quality of Advice Review (QAR) but argued that more work remains to be done.

Speaking to a small audience of superannuation fund CEOs and senior industry executives on Tuesday morning, Mr Jones revealed the government will accept 14 of the 22 recommendations made by QAR lead Michelle Levy.

But while he accepted in principle Ms Levy’s recommendation to expand the role superannuation funds play in advice, Mr Jones said he would further consult on expanding the provision of advice by other institutions, including insurers.

Namely, Ms Levy had recommended that alongside superannuation funds, insurers and banks should be allowed to provide limited advice governed by her good advice model.

However, the good advice model is also being consulted on further, with the minister acknowledging that recommendations 1 to 4 would be placed under further scrutiny before a decision on insurers and banks is made.

These cover Ms Levy’s proposals to broaden the definition of personal advice alongside the good advice duty, as well as the removal of the general advice warning.

In its response to the announcement, the recently formed life insurance peak body, CALI, said it is “important” that government legislation also allows life insurers to provide limited advice to Australians directly when they ask for it.

Referring specifically to Mr Jones’ argument that super funds should be welcomed because they are “already governed by strong obligations to act in the best interests of members”, CALI added that life insurers also have additional legal duties to act in good faith and prioritise the interests of their customers.

“Life insurers support people to make informed choices about their future so they can live in a healthy, confident and secure way over their lifetime. Life insurance protects workers and their families on their best and worst days,” said CALI CEO Christine Cupitt.

“This announcement is a good start but more needs to be done to help solve the unmet financial advice need for working Australians, not just those people approaching retirement. We must address the growing problem of underinsurance that is leaving people unprotected when times get tough,” she said.

Moreover, Ms Cupitt explained that of the 16,000 advisers operating in the industry, only 1,000 are “helping people navigate life insurance products”.

“[This] makes reforms for life insurance advice an urgent priority”.

According to CALI, where a consumer does not wish to engage a financial adviser, the law should enable life insurers to provide limited life insurance advice.

This, the body assessed, should only happen with “appropriate limitations” and “strong consumer protections”.

“Australians shouldn’t be waiting in line to pay $3,500 on average for financial advice, especially when life insurers want to be able to provide limited advice about their products to help people make informed decisions about protecting their future,” Ms Cupitt said.

Similarly, CALI member TAL said in a separate statement that it looks forward to “constructively engaging” with government and all stakeholders on reform that would enable life insurers to better meet their customers’ simple advice needs.

“TAL supports the announcements the government has made today to make it easier for financial advisers and superannuation funds to provide access to affordable, quality financial advice to their clients and members,” said TAL group CEO and managing director Brett Clark.

“All Australians stand to benefit from improved access to quality and affordable advice, and TAL will continue to constructively engage with government and all stakeholders on important reform that would also permit life insurers to better meet their customers’ simple advice needs. We should not miss this opportunity to better support life insurance outcomes for customers.”

TAL also welcomed the announcement under stream two of the government’s response, which, it said, will benefit super fund members through expanded access to advice, including for life insurance in superannuation.

Moreover, CALI highlighted the importance of life insurance in superannuation, labelling it “a critical safety net” for Australians and their families.

“Many superannuation members could benefit from an advice conversation to help them better understand their life insurance needs and the options available to them,” CALI said.

Ultimately, both CALI and TAL said they are pleased to see that the government is not ruling out the remaining eight recommendations from the QAR which have not yet been adopted.