A myriad of events and factors has reduced the life insurance industry to a mere “blip” on the radar, according to ASX-listed financial services provider ClearView Wealth.
In a statement to the House of Representatives Standing Committee on Economics, ClearView Wealth managing director Simon Swanson revealed that only around half of Australia's eligible workers have income protection and life insurance levels “continue to fall” despite relatively high levels of household debt.
“In a few short decades, Australia's life industry has unfortunately gone from a pillar of society to a small blip in financial services, despite offering products that are highly relevant to society,” Swanson said, as reported by Professional Planner.
Swanson highlighted that the underinsurance gap has widened as advice affordability has deteriorated.
“The industry must accept responsibility for its part in exacerbating the underinsurance problem,” Swanson added. “Complacency has led to under-investment, mismanagement, and a lack of innovation.”
However, from a policy standpoint, Swanson clarified that over-regulation had played a role – with compliance burden on advice businesses and major changes to adviser remuneration under the Life Insurance Framework driving up the cost to serve and advice price.
“This has created serious unintended consequences for families, society, and the government,” he continued. “Simplifying the way people buy life insurance would pave the way for digital solutions through both an adviser and directly, which would provide greater access to the benefits of cover.”
Aside from untangling the compliance knot for advisers, Swanson noted several ways policymakers could help the industry get back on its feet.
“We maintain that people should be able to choose how they pay for advice – fees, commissions, or a combination of both,” he said, adding that the life insurance review has been combined with the government's quality of advice review. “In addition, advice fees should be tax-deductible.”
