Life insurers want a bigger say in advising clients after super funds were given the go-ahead

The life insurance industry wants its companies to be more free to provide advice to customers, after the government made it easier for super funds.

Financial Services Minister Stephen Jones. Picture: Gary Ramage

The life insurance industry has urged the government to allow life insurance companies to be more free to provide more advice to customers following the federal government’s response to the Quality of Advice Review.

Financial Services Minister Stephen Jones announced moves on Tuesday to make it easier for super funds to provide financial advice, but held off supporting similar moves for banks, insurance and life insurance companies.

He argued that it was easier for the government to ease restrictions on super funds providing advice as they were under a legal obligation to act in the best financial interests of their members.

The Council of Australian Life Insurers said it was supportive of the government’s proposed reforms to allow superannuation trustees to provide advice to working people, including about the life insurance that was a part of their super. But it said life insurers should also be able to provide limited advice to people when they asked for it.

It said life insurance companies were also under legal obligations to act in good faith for their customers.

CALI chief executive Christine Cupitt said the announcement was “a good start”, but she said more needed to be done to “help solve the unmet financial advice needed 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.

“For many Australians, getting advice is too expensive or too inaccessible, with just 16,000 financial advisers to turn to across the country. Of these advisers, there are just 1000 who are helping ­people navigate life insurance products, which makes reforms for life insurance advice an urgent priority.”

CALI is arguing that life insurers should be allowed to provide limited life insurance advice in cases where a customer does not want to engage their own financial adviser.

“Australians shouldn’t be waiting in line to pay $3500 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. She said CALI welcomed the government’s willingness to work with the life insurance industry on potential reforms to include life insurers in legislative change on financial advice.

She said CALI strongly supported the government’s decision to remove red tape and improve transparency around the commissions advisers received for the life insurance products they sold.

She said the industry was pleased to see that the government was not ruling out the remaining eight recommendations from the QAR that had not yet been adopted.

MLC Life Insurance said it welcomed the government’s commitment to implement 14 of the 22 recommendations made by the QAR, but called for more people to be given access to financial advice from more financial institutions, including life insurance companies. “We’re pleased to see the Albanese government making advice more accessible to Australians, with the intention to allow members of superannuation funds to access advice on an affordable basis through their fund,” MLC Life Insurance chief Kent Griffin said.

“But more can be done to look after those who need access to affordable advice.

“Financial institutions are well positioned to give advice in the best financial interest of customers, helping both new and existing customers to ensure their cover is and remains affordable and appropriate to their needs.

“We’re looking forward to working with the government and trustees to make sure Australians have access to simple advice about life insurance products.”

Simon Swanson, the chief executive of ASX-listed wealth company ClearView, said moves to simplify statements of advice and the removal of fee disclosure statements for financial advice were a good thing.

But he said there needed to be more discussion about how advice was handled about life insurance within superannuation.

He said the government’s response to the Quality of Advice report “doesn’t really address the issues around the complexity of the interface between life insurance and superannuation”.

“Given that 50 per cent of life insurance is associated with superannuation, there needs to be a conversation around how that process can be simplified as well,” Mr Swanson said.