A joint report released by financial regulators this week on life insurance and claims handling has reinforced the superior value of group insurance through superannuation.
The Life Insurance Claims and Disputes Statistics Report, covering a 12-month period from 1 January 2019 to 31 December 2019, was issued on 21 April by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). The data in the publication aim at making it easier to compare life insurers’ performance in handling claims and disputes. This is the fourth publication using the full data set since the report was launched in March 2019.
Law firm Maurice Blackburn superannuation and insurance principal Josh Mennen said in a commentary on the firm’s website, “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.”
“The data shows that the claims paid ratio – the dollar amount paid as a percentage of annual premiums – for super total and permanent disability insurance was 85% compared with 45% when sold by financial advisors.
“It also shows that income protection through super led to just 33.7 disputes per 100,000 people insured, compared to retail income protection policies, which came in at a staggering 150.5 disputes per 100,000 people insured.
“This reinforces that while advisor-sold policies are often marketed as a bespoke product, too often they are compromised by conflicts of interest, including insurers paying trailing commissions that result in poor product selection and claim disputes caused by underwriting complications.
The financial planning industry must explain why consumers appear to be worse off when they consult a risk advisor, he said. “It also must outline how it is going to ensure insurance recommendations are genuinely in consumers’ best interests in order to win back public confidence.”