The final report for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released on 4 February 2019. Detailing the Commission’s findings with a total of 76 recommendations, the Final Report addresses all aspects of the financial services industry from mortgage broking and insurance to agribusiness lending.
With regard to the insurance industry, the most significant focus for the royal commission was broker commissions. With no instances of misconduct by insurance brokers found in the royal commission, this demonstrates this is not the critical issue facing the insurance industry in Australia.
With a trend of under-insurance in Australia already a strong one, insurance industry experts are concerned changes to or the elimination of current commission structures could further deter people from having the right level of insurance in place to protect their family and lifestyle. This stems mainly from the fact that people often have difficulty talking about the less than pleasant realities of insurance. After all, talking about death, disability and income protection aren’t exactly easy topics to broach particularly if you’ve been postponing this conversation for some time.
Alarmingly, the Commissioner, the Honorable Kenneth Maddison Hayne AC QC’s position on the matter of commission structures in the insurance industry is that consumers are already covered by the default insurance provided with superannuation products or direct-to-market providers. The problem with these products, however, is that they don’t provide adequate cover that’s tailored to a person’s specific situation. The claims process with default and direct-to-market insurance products also takes much longer than the process for retail insurance products. In a worst case scenario, you may not receive an adequate amount, or anything, from your claim which can have devastating effects on your livelihood.
With retail insurance products, however, you’re provided with individualized advice that specifically addresses your situation. If a claim needs to be made, your insurance adviser can help to make the process as smooth as possible. So, that’s the big question here — is it worth saving by opting for default or direct-to-market insurance products only for it to fail to provide adequate cover when you need it most?
When you’ve spent your working life carefully building your wealth and asset base, the last thing you need is for all of this to be placed at risk because you didn’t seek personalized advice in years past. In a nation as asset-rich as Australia, taking the time to have those difficult conversations now with a trusted adviser could save you down the track.