A Guardian Financial Planning-aligned firm has rejected notions that systemic issues regarding claims handling exist in the life insurance industry, adding there are ways to rebuild consumer trust.
In a submission to the Senate Economics References Committee, Perera Crowther Financial Services director Sam Perera said that following the CommInsure scandal, questions were raised as to whether other insurers are engaging in unethical practices to avoid paying out claims.
ASIC announced in March that it would launch an industry-wide investigation into claims handling across the life insurance sector to determine whether similar problems exist elsewhere.
Mr Perera, however, does not believe so.
“As a participant in the industry since 2005, I have not had any insights which suggest that the above mentioned issue is pervasive or systemic within the life insurance industry,” he said.
“To the contrary, my claims experience with insurers on behalf of my clients has been par excellence, which is supported by the number of claims that have been paid by life insurers during 2014.”
There are, however, other ways to rebuild consumer trust and ensure insurers are behaving ethically.
One of his recommendations includes requiring insurers to publish detailed claim statistics for each product, showing the number of claims denied and reasons for it.
“Insurers will be less able to market restrictive insurance contracts to unsuspecting consumers without having to disclose the claims success rates for the individual products,” said Mr Perera.
He also suggested there needs to be a review of the Financial Ombudsman Service terms of reference as well as a banning of approved product lists (APLs) for retail insurance advice.
“APLs are used among AFSL holders to control distribution of insurance products where they [the AFSL] have profit share arrangements,” Mr Perera said.
Further, Mr Perera recommends commission and other remuneration structures between superannuation funds and insurers should be disclosed.
“Currently, there is no requirement for a superannuation fund to disclose to its members particulars of a profit share or commission arrangement it may have with its insurer," he said.
“Disclosure will enable a member of a superannuation fund or other [consumer] of a product to understand the potential for conflicts of interest between trustees and insurers.”