Home / Life Insurance / Adviser group wants ‘clarity’ from life insurers on UCT regime
22 March 2021
Advice group Synchron has called on life insurers to provide “clarity” over how in-force policies will be handled when unfair contract terms (UCT) laws apply to insurance contracts from April 5.
Director Don Trapnell says advisers want to know what insurers are planning to do about policies that lapse, change ownership, change premium structure, or need corrections.
“Our understanding is that lapsed policies, policies that change ownership, for example from inside to outside super and the other way round, a change from level to stepped premiums and even simple typo corrections to a policy, will mean the policy has to be rewritten, which under the new regime means a new contract,” he said.
Mr Trapnell told insuranceNEWS.com.au he has spoken to two life insurers and was given a “we’re not sure” response. He says he will reach out to other life insurers to see what their plans are for the incoming UCT regime.
“At this stage, what we have not got from the life insurance industry is how it is going to be treating the unfair contracts act and how it applies to existing life insurance policies,” Mr Trapnell told insuranceNEWS.com.au.
“We don’t have clarity from the life insurers. No one is talking about it. I don’t understand why.”
insuranceNEWS.com.au has asked the Financial Services Council for a response to the matter raised by Synchron.
Mr Trapnell says he fears the way life insurers respond may compound Australia’s underinsurance problem.
“One of the big worries here is if we have tougher reinstatement, or additional underwriting, more policies will lapse, leaving more people without the protection they need,” he said.
“That’s a very poor outcome for Australia and for Australians.”
He says the flow-on effect of tougher reinstatement is there would likely be a massive spike in lapse data, which would obviously increase Life Insurance Framework lapse rates.
“In the best interests of policyholders and to assist the advisers who work with them, we believe life insurers must now publicly share how they intend to deal with this issue.”