Our report on the recent AIA Australia Round Table debate about expanding the use of general advice to tackle Australia’s underinsurance problem drew strong interest from readers this week…
Key industry stakeholders have debated the merits of embracing general advice as part of the solution to the underinsurance dilemma, with opinion divided between qualified support and significant concern.
In discussing the current and future role of general advice as it applies to life insurance solutions, panellist opinion at the recent AIA Australia Round Table was varied.
A “ticking time bomb” is how the CEO of Skye Wealth, Phil Thompson, described the general advice (GA) model during the discussion. He told his peers he fears it risks harming all advisers, if and when consumers start complaining about the advice given by the general advice cohort.
“I personally don’t love it,” he said. “I think it’s questionably legal.”
He reminded panellists of a 2021 High Court decision held that advice given to 14 Westpac customers – that they move their super funds into one of the bank’s funds – was personal advice and not, as Westpac had argued, general advice.
A lot of advisers have transitioned into this GA model, that feels like a ticking time bomb.
“That court case hinged on consumers making the assumption there was personal information being taken into account [for the bank] to make the recommendation,” said Thompson.
“A lot of advisers have transitioned into this GA model, that feels like a ticking time bomb.”
He said if the proposed general advice model does blow up, it’s going to be due to “…advisers moving policies and chasing commissions”.
“We’re all going to be painted with that same brush,” he said.
“If insurers can sell their own products direct then we may not actually need general advisers,” he added.
Demand for advice
Nevertheless, others taking part in the Round Table indicated that general advice could help meet the demand for advice.
Bombora Advice MD Niall McConville said that while personal advice remains the ideal, the lack of advisers means many consumers are not getting any advice at all.
“We understand that if you can provide personal advice to a customer that’s the best outcome you can get,” he said.
“But we also understand there is nowhere near enough advisers to speak to all the people who need some sort of advice.”
He said banks write between $500m and $600m of new home loans every year, and that many borrowers would normally have their mortgages covered with life insurance, “…they’ve not gone away”.
“We would be supportive of general advice,” he said. “I think the key is the environment that it’s provided in.”
However, he said that if advice drifts from general to personal, then that’s when issues can surface.
…General advice is a requirement that should be served…
MBS Insurance partner and CEO, Drew Burden, agreed general advice can help serve middle Australia, but cautioned that strong safeguards need to be in place.
“If someone says I need a million dollars worth of life insurance, and the adviser doesn’t say anything, they then walk into implied advice,” he said.
“If you are going to enter the world of general advice you need to be really clear around monitoring supervisions. I think it’s a completely different proposition to personal advice.
“People having access to general advice is better than not having access to advice.”
Click to watch 2025 AIA Australia Round Table: Advice at the Crossroads Part 4 – General Advice: Part of the Underinsurance Solution?
Pina Sciarrone, Chief Retail Insurance and Advice Officer, AIA Australia, told panellists that consumers need to be put first and that her firm is already seeing a growth in general advice.
“We can see it in terms of the influx of new business,” she said. “So I believe it definitely has a place.
“We also need to remember the consumer and find out how do they want to be served. They may not want to go down that full personal advice route.”
Click here to watch the 2025 AIA Australia Round Table series.
I believe that general advice will be the start of the great downside in respect for financial advice, particularly life insurance advice.
General advice was invented by the banks, and for the banks, who convinced the government In the early 2000's that they would be selling low value life insurance products direct to customers, to be sold over-the-counter by bank clerk's, using products with minimum underwriting, at predetermined sum insureds. As usual the banks got what they wanted.
Our our "friends", the life insurance manufacturers, see an opportunity to provide non-personal advice (product flogging) to the clients that we put with them on our recommendation. They hope to jump on the same bandwagon that the industry funds are currently galloping away on, to provide advice on a General advice basis, to flog their products, and only their products.
The problem is simply this: our clients don't understand the difference between general advice and personal advice. They think that when they buy life insurance products they are receiving personal advice. How would they know any different?
ASIC and various AFSL's have developed templates for those who currently provide personal advice and are looking to move to general advice. I put it to my colleagues that downgrading from personal advice to general advice for most of us would be like wrestling with alligators In a pool of ethical obligations.
Most of us who are left in our once-viable industry ,after the ravages of LIF, FASEA, duration based pricing, and gouging of legacy contracts, have decades of experience to offer to our clients. But if we start to operate under general advice, we basically have to keep our mouths shut and can only provide information about products, if asked. We cannot respond to any questions from potential clients as to what level of cover they should have, or even as to what level of cover "everyone else" has. It's a trap for young and old players
I would even suggest that if a client comes to a general advice adviser, and seeks life insurance for a nominated sum, if the adviser dares to ask" how are you protecting your income", then that could also be deemed as breaching the rules of general advice.
In fact I'm advised that the large advice firms that are engaging in general advice for life insurance sales, basically have computerised systems which essentially prevent direct contact between the adviser and the insurance purchaser.
Where do we park our conscience? Under the general advice rules, we provide the customer with a table of recommended covers for say income protection, and allow the customer to choose the provider. Human nature is they will choose the cheapest.
But those of us who do our research will know that the cheapest Income Protection product in our little table In all likelihood will also be the nastiestIn claim terms, because of, say, the way it treats medical advice from the claimant's treating GP.
Then there are other significant differences which may penalise clients in certain circumstances, but we are not allowed to identify those circumstances by obtaining personal information.
Can we tell them? Would ASIC classify that as product information and thus allowable? Whatever you provide ASIC-provided claim statistics which show that one particular insurer has become a recalcitrant claim provider. Is that verging on personal advice?
Take the issue of offsets in income protection. Specialists know that there are still some insurers who will reduce the monthly benefit by a worker's compensation entitlement that the client has yet to receive. That's a big issue for tradies who have their own companys, at thier employers request, but may not actually carry workers compensation insurance.
Phil Thompson is correct: when this blows up, (and it will) all advisers will be tarred with the same brush.
It seems to me there are two key factors driving the uptake in general advice for individual advisers and they are both financial. My understanding is that advisers who choose to be operating under a general advice scheme do not pay the ASIC levy, nor the CLSR levy, both of which were rapidly approaching $10,000 per year. The other factor is the rapidly increasing level of additional compliance. A 35-page SOA to sell $1 million of term cover is just a joke
I agree with Phil Thompson. If there is an increasing take-up in advisers moving to general advice from personal advice, that can only have the effect of downgrading the value of personal advice and that has to have an impact upon perceived value be provided to the client.
And I disagree with Niall’s comment, which I assume is now being made from the point of view of an AFSL, not an insurer, that “general advice is better than no advice”. As far as I’m concerned, general advice is in fact NO ADVICE, and the term itself will be misleading to consumers, and its continual use in client interactions is not acting in the client’s best interests, because it’s really focused on our needs as advisers to survive in this industry.
General advice is just order taking. May as well put on a restaurant waiters bow tie and converse in faux French
Exceptionally well done Old Risky. Your 'comment' is more enlightening than pretty much all/any full articles I have read in industry magazines on this subject, including this great masthead. I should thank you, for all readers here, for going to the trouble of helping your fellow advisers make some sense of this idiocy. God knows those in power that should be making sense of it for advisers are definitely NOT.
I cannot shake the feeling that this, allied with FARCE-IA, LIF, et al, is simply a long term contrivance to rid financial advice of 'independent' advisers on behalf of the banks. Much stranger things have happened. As you mentioned, they usually get what they want. Witness the 4,500 still to qualify/register before 2026. I think 90%+ of them will walk away at that time. As usual, money talks and the big end of town will again get what they want – ALL the clients.
While I do stay interested in my old industry (profession?) and this distresses me greatly for advisers and clients alike, all I can add is thank the good Lord above I am no longer part of this horrible malaise. God bless.
Phil Thompson is 100% correct in his comments. The only rationale I have heard for general advice is:
(1) It's easier to give advice
(2) Insurance companies will write more business
There is no benefit to the client, who wears the risk of the flawed process. It's not advice given it can't take into account personal circumstances of the client but will be considered advice by the clients who can't make a claim in the future. Rather than come up with something that is completely flawed why don't the insurance companies use their considerable lobbying funds to improve how personalised advice can be provided in this country?
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