Unfair contract terms should be statutorily extended to life insurance contracts, the Association of Financial Advisers (AFA) says.

Its submission to a Senate inquiry into consumer protection laws says the move is long overdue.

“The Productivity Commission recommended it in 2008, and in 2009 the Senate Economics and Legislation Committee recommended the same,” the submission says. “Consumers are not provided with adequate protection in insurance contracts under existing law.”

The association argues different policy premiums for individual contracts do not justify exempting the life insurance industry.

“Surely insurers should be subject to the same consumer protection laws that apply to all other consumer goods and services. The AFA recommends the Federal Government reopen the previous attempts to extend unfair contracts terms to life insurance policies.

“This is a glaring gap in the Australian Consumer Law and should be rectified without delay.”

The AFA also calls for the Life Insurance Code of Practice to foster a new culture among life insurers.

It wants consumers’ health and wellbeing put alongside sustainable financial performance, restoring the social licence granted to life insurers to protect families.

“People need to trust insurers to be fair and reasonable.

“A code could be the vehicle to restore this trust and social licence – provided it is constructed to hold insurers to account for their commitments to consumers’ best interests.”

The AFA says the code “needs substantial improvements before it can achieve the intent with which it was promised. A review of the code has been scheduled to take place by July 2019 and if it is not improved shortly after this to restore insurers’ social licences, the AFA considers the Government should consider intervening to develop a statutory code.”