The Financial Services Council (FSC) believes any binding mutual obligations between advisers and life companies should not be included within the new Life Insurance Code of Practice.
FSC Director and TAL Life Chief Executive, Brett Clark, who is also co-chair of the FSC’s Life Board Committee, said the Code was deliberately designed to promote life insurer obligations to consumers and ongoing work on the code would remain consistent with that original goal.
Speaking at an Australian and New Zealand Institute of Insurance and Finance breakfast in Sydney recently, Clark said the FSC wanted to be very consistent that consumers were the core focus of the code, but it was aware of the need to consider advice within the life insurance sector.
“The place and role of adviser was discussed quite a bit during the development of the code as was to what extent it would apply to advisers,” Clark said, “but it is very deliberately a consumer facing document.”
“It is not a document which has an objective of setting out obligations between financial advisers and consumers. If that was a piece of work that was needed the Association of Financial Advisers (AFA) and Financial Planning Association (FPA) would be best placed to take that forward, and life insurers could contribute to that,” Clark added.
He also stressed that obligations between life insurers and advisers also did not belong within code and the financial advice sector was best suited to addressing that issue.
“If there is some set of mutual obligations applicable between life insurance companies and advisers the Life Code of Practice is not the place for that. The Life Code of Practice is about setting out standards and obligations between life insurers and consumers. We need to be clear about that and consistent about that,” Clark said.
“If there is a separate set of obligations between life insurers and advisers, that needs to be dealt with elsewhere…”
“If there is a separate set of obligations between life insurers and advisers, that needs to be dealt with elsewhere between the FSC, AFA and FPA,” he stated.
Clark said the consumer focus of the code was due to the fact that prior to its development “…the life insurance sector was noticeable for its lack of a code compared with the banking and general insurance sectors” and that interactions with consumer advocates highlighted the problems around failures in life insurance for consumers.
He also refuted claims the Code did not apply to life insurance inside superannuation, drawing a distinction between the obligations of FSC life insurance members and the decisions of superannuation trustees.
“To clear up one thing which has been widely and disappointingly misreported, the Code does cover superannuation and is mandatory for all FSC life insurance members in all channels – retail, direct and group. What it covers is life insurer’s obligations inside group insurance but it does not cover superannuation trustees and for members of funds the insurance experience spans the insurer and trustee,” Clark said.
“The Code does point out that often a member’s insurance experience and interaction will be through the trustee. The FSC and others have had many conversations with the super industry about this and there is lot of good will and intent to do this piece of work,” he added.
Clark also stated the FSC would not be advising life insurance members on how to apply the code but did encourage members to begin to implement it as soon as possible.
“It is not a handbook for life insurers and the intent is to set out standards and obligations on the way they deal with customers and life insurers need to work out how to do that for themselves,” Clark said.
“The life insurance industry is a broad church with different models, systems and cultures, and the challenge and the opportunity is not just to look at the Code and get to the current standard, but to go beyond it.”
