The AIOFP has proposed further scrutiny of direct life insurance sales to a parliamentary committee, arguing these are putting consumers in a “dangerous position”.
In a submission to the life insurance inquiry – to be conducted by the parliamentary joint committee on corporations and financial services – the AIOFP said it believes life insurers are ramping up efforts to directly target consumers and bypass financial advisers in an effort to payout fewer claims.
“Allowing companies to sell flawed products directly to consumers without being underwritten and guaranteed upfront is an affront to consumer fairness.”
The AIOFP also said there needs to be more clarification around what is considered a lapse of a policy. For instance, the association does not believe the death of a policyholder should be considered a lapse.
“Policies that are terminated due to retirement or becoming obsolete to the consumer’s circumstances should not be considered a lapse,” the AIOFP said.
“The inclusion of these policies in the lapsed category can only serve one objective: to build a negative story against the advisers to justify change in the companies’ favour.”
Further, the AIOFP called for changes so that companies can be scrutinised by the Financial Ombudsman Service (FOS).
“Advisers and companies are shareholders of FOS, but only advisers are subject to legal process, scrutiny, threats of expulsion and subsequent loss of AFSLs,” the submission states.