Superannuation funds and their insurers should better disclose their commercial arrangements around group insurance in the interests of transparency, according to the Association of Financial Advisers (AFA).
The AFA has used its submission to the Joint Parliamentary Committee review of the Life Insurance Industry to argue for better disclosure around the differences between direct insurance, group insurance and retail advised insurance.
In a list of recommendations to the Parliamentary Committee, the AFA has pointed to a key differentiator between retail advised insurance and group insurance and has called for insurers be required to underwrite all insurance products at the time of application “banning the practice often seen in direct and group insurance of underwriting at the time of claim”.
The submission has also recommended that insurers be required to not increase premiums during the first two years of policy commencement (thus matching the clawback period applying to advisers), except for consumer price index (CPI) increases in the sum insured.
It has also recommended that insurers be made to comply with the duty of utmost good faith with disclosure comparisons to enable informed decisions before consumers choose to replace existing policies that they hold into direct channels.
The AFA submission also recommended that, to facilitate better transparency and decision making, superannuation funds should be required to “disclose their arrangements with life insurers in relation to their group life insurance agreements”.
It also recommended a review of remuneration rules to ensure that people insured through group insurance are able to access quality financial advice.
