Underinsurance remains the life industry’s biggest problem but it is being overshadowed by the debate on churning, the Financial Planning Association (FPA) warns.

“The problems are more than just churn – it is a symptom, if it exists,” GM Policy Dante De Gori told Life+Health insuranceNEWS.com.au.

“And if churning didn’t exist there would still be underinsurance.”

More clients may be moved between policies as advisers strive to meet the best-interests duty, he says.

“People will always look for deals and the adviser is obliged to recommend a product that meets the client’s needs better.”

Mr De Gori says churn is an easy target for people seeking a solution to the sustainability problem.

“The fundamental problems with the industry are insurance sales to new people, product design and complexity, together with underwriting issues.

“There are also problems with data feeds to advisers from insurance companies.

“Technology in the life industry has not been updated as well as other segments of the financial services industry.”

Me De Gori says the industry needs better data to fully understand the size of the underinsurance problem, and to find answers.

“The solution is not just remuneration, product design or claims management – it involves everybody in the industry.

“We have to make advice on insurance accessible for consumers, but we also need to tell them about items such as income protection being tax-deductible. And while getting advice is appropriate, we have to accept some people want to go direct with the insurance.”

He says all aspects of the industry need analysing in the search for solutions to underinsurance.

“The FPA is considering a white paper on the issues. It is a sector issue and everybody has a role to play in dealing with underinsurance, the real problem.”