It looks like the Association of Financial Advisers (AFA) isn’t taking the claims made by Maurice Blackburn Lawyers sitting down, with AFA policy and professionalism general manager Phil Anderson speaking on behalf of the trade body in response to the law firm’s recent pronouncements about the financial advice sector.
The AFA accused Maurice Blackburn of ‘jumping’ to a range of conclusions following last week’s release of 2019 life insurance claims and disputes statistics from the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission.
In Maurice Blackburn’s release, superannuation and insurance principal Josh Mennen stated: “This report has some very compelling data that makes clear that group insurance through super remains a crucial product that delivers significantly greater value for consumers than other policies, including those supposedly tailored by financial advisors.”
Anderson described the above assertion as “directly at odds” with APRA’s comment within the report which urges caution in interpreting the information presented in the claims paid ratio table as a measure of consumer value or product profitability.
“It is very easy for the financial advice sector to dispute the Maurice Blackburn statement by referencing the average benefit paid,” said Anderson, whose camp believes that the most meaningful measure of value for life insurance clients is what the policyholder or their family receives in the event of a life insurance event and how it aligns with their actual needs.
“The average claim benefits demonstrate very clearly that those clients who receive specific tailored life insurance advice from a financial adviser receive a benefit far more relevant to their circumstances and their household debt and living costs,” declared the general manager. “This clearly demonstrates significantly more value for financial advice clients.”
It was pointed out that the claims paid ratio, while a useful measure, is not a complete one. Anderson noted that it does not include all costs experienced by customers and also does not take into account the complexity of the product. According to the AFA official, a true measure of the direct benefit to clients/group super fund members would be the net return to clients/members divided by the total cost to clients/members.
Anderson added that group super products are simpler products, and that the premiums paid by members do not span any ongoing advice or support to ensure that the level of cover is in line with individual requirements or circumstances.
As for the issue of disputes, he had this to say: “It is important that this data is analysed in detail to genuinely understand the meaning of it and what needs to be considered to maximise the outcome for consumers. Making uninformed claims before the completion of this research is not appropriate or helpful.”
To this end, the AFA said it is open to a deeper probe of the numbers while expressing its willingness to contribute where it can.
“We welcome further investigation of the APRA claims and disputes data and will not be leaping to conclusions or making broad unsubstantiated claims,” stressed Anderson. “Neither will we be seeking to undermine consumer confidence in one segment of the life insurance market at this most challenging time as the country comes to terms with the impact of the coronavirus pandemic.”
