New Financial Services Council (FSC) chief executive Sally Loane has indicated she wants to see major changes in the life insurance industry to restore consumer trust.
In her maiden speech in the role, addressing the FSC Deloitte Leadership Series lunch in Sydney last week, Ms Loane said the industry status quo is “not an option” and that the FSC along with the AFA is working towards industry reform.
“In the wake of an ASIC Review of Retail Life Insurance Advice last October the FSC and the [AFA] set up a process to review the ASIC report and present durable solutions to the issues raised,” Ms Loane said.
“Our national wellbeing benefits from a quality, sustainable and innovative life insurance industry.
“A healthy private insurance sector vested with community trust is required – and particularly [as] our society ages,” she said.
Ms Loane also said the FSC is examining the role the life insurance industry can play in reducing the future costs to the government with the National Disability Insurance Scheme (NDIS) and the Disability Support Pension.
“Income protection insurance that protects against the economic risks of disability is an underused policy device in Australia, which could reduce Commonwealth budget pressure arising from increasing disability-related welfare costs,” Ms Loane said.
“Just as superannuation is the private sector solution to the costs of an ageing population and private health insurance is a private sector solution to managing health care costs, so too life insurance can be the private sector solution to the increasing budget costs of welfare.
“To demonstrate the costs that could be saved by privatising a portion of the NDIS, which is not means tested, and the Disability Support Pension, FSC engaged Deloitte Access Economics to construct an alternative policy design which utilised income protection insurance.
“By using incentives and disincentives, the modelling shows that improving the level of private disability coverage could generate net savings of $8.5 billion,” Ms Loane added.