The chief executive of a risk advice practice says there are currently no effective means to address churning in the direct or group insurance space, with existing measures unfairly targeting advisers.
In his submission to the parliamentary inquiry into the life insurance industry, seen by Risk Adviser, Life Insurance Direct chief executive Russell Cain suggested a removal of the commission caps and extended clawback period proposed by the recently passed Life Insurance Framework bill, as they fail to address churn across the entire life insurance industry.
“[The measures] do not address churn across the life insurance industry,” Mr Cain said.
“They are purely driven by the banks and insurance companies to increase profits and remove competitions out of the retail distribution sector, increase premiums and create more of an advantage for vertically integrated businesses.
“[This] will lead to poorer consumer outcomes [and] cause greater underinsurance at the cost of Australian families and the government.”
In proposing alternative measures to address churning, Mr Cain suggested a new standardised summary section be inserted into all product disclosure statements, written in plain language to clearly inform customers about their policies.
“Empowering customers to easily understand what they are, and not covered, for is critical,” he said.
Mr Cain also said there should be standard policy schedules and renewal notices explained in plain language as a yearly reminder to consumers so they can decide whether what they’re covered for is essential.
Lastly, he suggested customers should do away with all existing application forms to other insurers as part of complying with their duty of disclosure.
“This proposal is unique and is to capture any potential churning in any of the distribution channels where the intermediary is remunerated for the provision of advice or facilitation of the sale,” Mr Cain said.