The sustainability of the group life sector is under pressure due to laws restricting life insurers from being able to offer targeted rehabilitation benefits to injured workers, according to the Financial Services Council (FSC).
The FSC made the claim in a statement given to Fairfax media which published an article over the weekend about the number of disputed claims related to life insurance held through superannuation funds.
“Current laws actually prevent life insurers from offering targeted rehabilitation benefits…”
In the statement, which was made available to all media following the Fairfax article, the FSC stated that regulation impacting the sustainability of the group insurance sector had been largely ignored and that barriers that stopped people returning to work after an illness or accident should be removed.
“Current laws actually prevent life insurers from offering targeted rehabilitation benefits to help people get back to work faster. These restrictions need to be removed, because the longer a person is away from work, the higher the likelihood of poorer mental and physical health culminating in a more permanent disability,” the FSC stated.
“Specifically, life insurers cannot make targeted rehabilitation payments for medical treatment or therapy that they determine to be relevant, appropriate and necessary to return the claimant to work.”
The FSC claimed if these restrictions were moved life insurers could offer rehabilitation benefits to get people back to work and boost the probability of a successful rehabilitation relative to the status quo.
“The Code…is being built on principles of honesty, transparency, fairness and timeliness”
It made the claims in comparison to the development of its own Code of Practice and the possibility of the reintroduction of the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 into Parliament.
The FSC described these two development as two major parts of the biggest reform of the sector for decades claiming the Code of Practice “…will considerably strengthen consumer protections around life insurance” while the legislation would “…significantly reduce high up front commissions paid by insurers to advisers”.
“The Code, a key recommendation of the 2015 Trowbridge Inquiry, is being built on principles of honesty, transparency, fairness and timeliness. It is an important part of our commitment to strengthen community trust and confidence in life insurance,” the FSC stated.
