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FPA calls for policy feature improvements

The Financial Planning Association (FPA) says consumers should derive benefits from the significant features of life insurance policies.

In a submission regarding a Treasury paper on design and distribution obligations and product intervention power, the FPA says life insurance products should contain a number of significant features, including those that define the circumstances in which the policy will pay and the function of underwriting rigour and timing.

It says the claims experience should be detailed, to show a willingness to pay even if the claim does not fall squarely within defined circumstances of payment.

There should also be information about speed of payment and support provided to the consumer during claims handling.

The FPA wants product intervention powers to be under strict parliamentary scrutiny.

“Interventions should only be… permanent if they are enshrined in legislation,” the submission says. “The proposed reforms have the potential to be highly distortive.

“Permanent interventions should be subject to a high degree of Parliamentary scrutiny, because the community has no definite prospect of escape from these provisions, short of leaving the market.”

The FPA wants this oversight applied to individual and market-wide interventions by the regulator.

It argues the impact on product providers and the marketplace would be severe, so there must be a high degree of scrutiny. It calls for the powers to rest with a delegated authority.

“We would strongly recommend consultation with affected parties and that independent merits review – by, say, the Administrative Appeals Tribunal – of individual interventions be available,” the submission says. “While an intervention is subject to appeal, the review body should be able to suspend the intervention.”

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