A life adviser group has blamed the Financial Services Council (FSC) and Financial Services Minister Kelly O’Dwyer for the perception of a “scandal-ridden” life insurance sector.

The Life Insurance Customer Group (LICG) argues repeated claims over churning and high upfront commissions are “unproven and unjustified”.

It says recent mainstream media stories on the sector did not involve independent life insurance advisers, but they are being blamed.

“In the [ABC Four Corners] program Money for Nothing, James Kessel was denied the full value of his insurance contract because of outdated policy definitions,” the LICG says.

“Mr Kessel’s contract was 20 years old. With the benefit of an experienced, competent adviser, Mr Kessel would have known of the deficiencies in his contract definitions and an attempt made to upgrade.”

The LICG says if an adviser had recommended changing the policy, they would have been accused of churning.

“Because the FSC has not defined ‘churn’, we don’t know whether insurers would consider this a good enough reason to replace the policy.

“However, the intent in the program was not to show the value advisers bring to their clients – it was to display [the] lack of credibility of an insurer with allegations of impropriety and claim ‘avoidance’.”

Other disputed claims featured in the ABC program concerned group life insurance policies administered by FSC members, the LICG says.

“No advisers and no commissions were involved. The story was almost exclusively about group insurance, insurance inside super funds or other group plans.”

The LICG argues forthcoming legislation to cut adviser commissions is based on flawed research and supposition.

It says the Government has not considered who is causing scandals.

“The true scandal in this is the [Federal] Government allowing the FSC, with scandal-perpetrating members who don’t have to answer to anyone, to control a process for ‘industry reform’. This is not good leadership or good policy.”