The new Life Insurance Code of Practice is hot off the press from the FSC. But will it resonate with consumers after an extended bout of bad publicity?
According to Financial Services Council (FSC) CEO Sally Loane, the Code is built on some fundamental principles – “honesty, transparency, fairness and timeliness.” She adds, “We want Australians to understand that life insurance can and does measurably improve lives and protect livelihoods.”
The FSC has pointed out that the Code goes beyond the existing law in many areas. In particular, it fills in detail where the law is silent in relation to customer service, such as detailed plain-English disclosure, a requirement to review and update medical definitions, detail around how sales must be conducted and monitored, remedies for miss-selling, a clear process for claims handling, and standards for claims investigations, including interviews and surveillance.
Beyond the FSC reviews of the Code are mixed
However, consumer groups are not completely satisfied with the Code.
Gerard Brody, Consumer Action Law Centre CEO, says while the Code is an acceptable starting place, there are significant gaps that need to be addressed.
In addition, a grey area remains in regards to group cover. The Code places obligations on life insurers who provide group insurance through superannuation funds. However, superannuation trustees will often carry out most of the member-facing activity. Katherine Lane, Financial Rights Legal Centre Acting Coordinator, says the Code does not put a timeframe on when insurance claims from those Aussies with their life insurance through super will be decided.
Can education make a difference?
CoreData research commissioned by Zurich in 2015 on Insurance Literacy, found 59.9% of Australians have some form of life insurance, and indeed, the majority (62.7%) purchase cover through their super fund – many without assistance from a financial planner.
Yet the same CoreData study highlights the benefits to consumers – and as a consequence the broader industry – of purchasing life cover with the aid of a financial planner.
Across all respondents, 58.1% rated their life insurance knowledge and experience of life cover as average, while more than one in five (21.2%) rated their knowledge/experience as poor or very poor.
Tellingly, CoreData found the average literacy for those who had sought financial advice was approaching ‘Excellent’ levels, compared to the unadvised, who on average fell into the ‘Poor’ range of scores.
The bottom line is that the new Code is a step towards improved relationships between the industry and consumers. However, consumer education via the support of insurers and financial advisers could be a linchpin that measurably improves the confidence of consumers – and the reputation of the industry.