The Association of Financial Advisers (AFA) wants a parliamentary joint committee’s inquiry into the life insurance industry to examine more than just adviser commissions.

“We also expect the [committee] to have a keen interest in the poor relative performance of the direct and group life insurance channels,” CEO Brad Fox said.

“We want to see the code of conduct adopted by the life insurers go much further than it has to ensure consumer and adviser protection. Until life insurance in superannuation is appropriately included, consumers and advisers remain deeply exposed if insurers offer inappropriate incentives in order to win business.”

Another area of concern is the timing of underwriting policies.

Mr Fox calls for underwriting to happen at the commencement of the policy.

“Underwriting after a death or illness occurs is unconscionable,” he said. “Imagine the grief of a spouse who discovers, after paying life insurance premiums for months or years, a claim will not pay out on the death of their spouse – and never would have been paid out.”

Mr Fox says more work is needed on simplifying statements of advice for life insurance.

“We need to see the Australian Securities and Investments Commission complete its work on this,” he said. “With a legislated best-interests duty, less commissions, higher minimum education standards and subscribing to a code of ethics becoming the norm, documentary proof of the advice being given must become simpler and easier to deliver to the client.”

Mr Fox says licensees and their legal advisers need to work on statements of advice to ensure they are concise, easy to read and easy to understand.

“This will remove the need to hide behind disclaimers that clutter advice documents, making them next to useless for the purpose of gaining informed client consent to proceed.”