A review of life insurance offered within super funds should be undertaken after the Future of Financial Advice (FOFA) reforms become law.

The Senate Economics Legislation Committee wants the review to look at the role of life insurance within super funds, including the delivery of tailored advice to members on their cover.

“The review should take into consideration the evidence provided to this committee and should also consider the discounted rates made available to consumers on group life policies,” the report says. 

“The Australian Securities and Investments Commission’s supervision and findings on the sale of group life insurance should also contribute to the review.”

The report notes divergent views on life insurance commissions within super, with some groups calling for them to be banned while advisers providing group life policies want them retained.

Commissions on life insurance outside super will be retained. A joint consumer group submission to the committee says advisers would switch to selling these products to retain commissions.

The National Insurance Brokers Association and the Association of Financial Advisers questioned why life insurance within super has been banned.

Treasury also told the committee the underinsurance problem in Australia is the reason why all life insurance commissions haven’t been banned.

The committee said it recognised the FOFA bill must “strike a balance between two equally important elements”.

“The bill must provide essential consumer protections to guard against conflicted advice, ensuring advice is in the best interests of the consumer,” the report said.

“It also needs to ensure that advice on life insurance is readily available to consumers both within and outside super.”

It is these conflicts between the life insurance industry and consumer groups that have led the committee to call for a comprehensive review of insurance bundled within super funds.

“These conflicting views are somewhat representative of the tensions that must be addressed to both protect the interests of consumers and ensure adequate levels of advice are available,” the report said.