The Financial Services Council (FSC) has reiterated its position that life insurers should be able to rationalise products but has added that ASIC should be given oversight of the process.
Responding recently to Questions on Notice from the Parliamentary Joint Committee Inquiry into Life Insurance, the FSC stated that, under current legislation, life insurers can merge statutory funds but remained limited in their ability to rationalise products within their own portfolios.
The Council told the PJC that the Insurance Contracts Act should be amended “…to allow life insurance companies to unilaterally amend policy terms where the overall benefits enjoyed by cohorts of consumers are greater than those that the consumer currently enjoys”.
This was the same position the FSC put before the PJC Inquiry late last year when it claimed the inability of life insurers to amend policy terms meant its members were required to maintain close to 300 legacy insurance products at the cost of tens of millions of dollars (see: Legacy Products Climb as Rationalisation Stagnates).
In answering the question as to whether the courts, regulators or insurers should decide what was in the best interest of policy holders, the FSC expanded on its original statements and added that ASIC should be involved in the process.
“We would like to see ASIC play an important role in this process to ensure that, on balance, customers are better off as a result of the rationalisation. This would be a requirement that the provider initially conducts the assessment with oversight from ASIC,” the FSC stated.
