MLC Life Insurance believes life insurers should be able to provide simple, personal advice under the Quality of Advice Review (QAR) in the same way as superannuation funds.
In the government’s formal response to the QAR, it stated super funds should be able to provide advice to its members and, if successful, this could later be expanded to banks and insurers.
The firm said it is “virtually impossible” for insurers to help members with simple queries about their coverage or provide advice that suits their personal circumstances. If the member lacked a current financial adviser then MLC is unable to help them, it said.
Kent Griffin, chief executive of MLC Life Insurance, said: “Australia’s superannuation system is world-class, in providing consistent wealth creation to working Australians while providing them a default base cover of insurance and the government’s announcement to allow super funds to provide advice to their members is a terrific step in the right direction.
“The same notion that would see super funds provide customer service so their members have access to personalised information to make the right choice for their circumstances, is also true for Australia’s life insurers.”
The reason given by Stephen Jones, Minister for Financial Services, for starting with super funds is that they are subject to different regulation and fiduciary obligations.
“If we can’t get it right in retirement, we have no hope in any of the other areas. They have different fiduciary duties, different prudential arrangements, it’s a much safer sandbox to progress these things than in banking or managed investment schemes which have very different arrangements to super,” Jones said last month.
“There’s more protection and prudential oversight in super and it’s the biggest part of the biggest problem.”
But Griffin feels insurers also have their own specific regulations that can protect consumers.
“Like super funds, insurers are governed by an obligation to act in the interests of our customers, including section 13 of the Insurance Contracts Act 1984, which imposes a statutory duty of utmost good faith on life insurers, and has been interpreted by the courts as requiring the insurer to look to the interests of the policyholder,” he said.
“These obligations are in addition to the many consumer protection and conduct obligations by which life insurers are currently restricted to operate only in the interests of customers and potential customers including the requirement to operate efficiently, honestly and fairly, anti-hawking requirements, product design and distribution obligations, prohibition on misleading and deceptive conduct, and the imminent Financial Accountability Regime.”