The forthcoming financial system inquiry should address significant structural issues in life insurance, Suncorp Group CEO Patrick Snowball says.

High upfront commissions, increased claims and lapses by disengaged customers must be dealt with, he told the Trans Tasman Business Circle last week.

Mr Snowball says life insurers have failed to build relationships with customers and have become overly reliant on advisers, while advisers in turn rely on high upfront commissions. 

Customers are disengaged, struggle with affordability and view life insurance as a discretionary spend.

Policy lapse rates are compounded by increased claims, much of them mental health cases with legal support, Mr Snowball says.

“After changes were introduced to lump-sum benefits allowable under workers’ compensation, lawyers have looked instead to the life insurance sector.”

He says litigation-supported retail life claims grew 42% between 2009 and this year, while litigation-supported group claims increased 63%.