The Association of Financial Advisers (AFA) has questioned the wisdom of buying life insurance direct, flagging potential problems with claims.

It says buying cover over the phone or online after answering just a handful of questions should sound alarm bells for consumers.

“As is often the case in life, if it seems too good to be true, then it probably is,” CEO Brad Fox said. “Buying life insurance without a financial adviser might be faster upfront, but the sting is in the tail.

“It means the policy has not been underwritten and, at claims time, consumers may well find out they were never covered.”

The AFA wants all life insurance underwritten at application time.

“At claim time, if a direct insurer determines you had health issues back when you purchased the policy, or even in the years before, they may only refund the premiums and not pay out.

“We think that is unconscionable.”

Mr Fox says a recent Roy Morgan survey (see earlier story) highlights positive customer feedback when accessing direct life cover, but it fails to give the full picture on poor claims outcomes.

“It is absolutely clear the best way to reduce the risk of a policy not paying out at claim time is to see an adviser. It will take longer to put the insurance in place because it will be carefully underwritten in line with the client’s individual medical and family history before it is offered.”