The Association of Financial Advisers (AFA) says it still has concerns about the revised draft Life Insurance Code of Practice compiled by the Financial Services Council (FSC).

In a letter to members obtained by insuranceNEWS.com.au, GM Policy Samantha Clarke says the AFA wants the code to be consumer-friendly and life insurers to auto-upgrade existing policies.

“The code must be a customer-centric document with a focus on continual improvement for the benefit of customers,” she said. “The code should better represent the role and value of quality financial advice about life risks, cover levels and replacement comparison.” 

The AFA wants a commitment to educate insurers’ sales staff on the best-interests duty, and calls for lapse data to be shared with advisers.

The draft code states its objective is a commitment to higher customer service standards and continuous improvement in the life insurance industry.

Products covered under the code include funeral insurance, meaning many direct insurers would be bound by it if they sign up.

Exclusions from the code include annuities and life insurance bonds, whole-of-life endowment policies, life products issued by general insurers and health insurance.

The code does not include advisers in the phraseology of clauses covering life insurance sales, but it does refer to “our staff”.

Under sales practices, one curious clause says staff must not sell a policy to a customer if “it becomes clear that they will be unlikely to claim the benefit under the policy”.

It could be argued most customers enter a life insurance contract hoping never to claim.

One area of concern for advisers is the requirement for life insurance companies to monitor sales arrangements it has with them.

“We will have monitoring arrangements in place to oversee the conduct of our authorised representatives… such as mystery shopping, independent audits and analysis of key data such as sales results, lapses, claim declines and complaints,” the draft code states.

Life insurance sold as part of a home or car loan will be on an opt-in basis rather than opt-out, according to the code.

While the code covers retail life policies and sales, it refers to group life only in terms of a representative that can contact the insurer on behalf of the insured.

The omission of group life insurers and policies is surprising because more lives are covered in these policies than retail products.

Certainty, the FSC would have difficulty persuading superannuation funds to sign up because industry funds have their own associations.

The period of co-operation between industry funds and the FSC under former CEO John Brogden was measured in months rather than years.

Comments on the code must be submitted by Friday. It comes into force on October 1, with a compliance transition period until June 30 next year.