The Banking Royal Commission in Australia has been a talking point since 2017, so now let’s look at the Banking Royal Commission’s impact on life Insurance and the Australian insurances landscape in 2020?
Firstly, What is the banking Royal Commission?
The Royal Commission was setup and tasked to investigate systemic misconduct in the Australian financial services industry, namely, the banking, superannuation and insurance industries, and specifically around money laundering, dodgy fine-print, aggressive sales tactics and product cross selling without personal advice, or the consumers best interests being considered. This was particularly focussed on the life insurance industry because ‘life insurance’ is typically a product banks used to cross sell.
Led by the former High Court judge Kenneth Hayne, the Royal Commission was set to take 12 months and cost the Australian tax payer $75 million and present a final report due by February 2019. The findings of this report has had major implications for the financial services industry and in 2020 we’re seeing the Royal Commission’s Impact on Life Insurance, particularly on insurers and brokers approach to new-client acquisition and marketing.
So, Here is an outline of the Royal Commission’s Impact on Life Insurance:
Currently when people purchase a vehicle or maybe get some credit like a credit card or a personal loan, they may also then be sold insurance and the insurance may be of low value to them or maybe not even relevant to their needs. So what that means is they could be paying for something that they don’t even need. One of the outcomes of the Commission and one of the recommendations is that they should actually defer that whole sales process. So when someone does purchase a motor vehicle or a credit product like a home loan that they then aren’t sold insurance straight off the back of it, and what they will actually do is remove the pressure from the sale and then the consumer can actually then consider, whether, that product is right for them. Maybe at a later time when those sales representatives may get in contact with them.
Some of the insurers are able to cold-call, so they’re able to initiate a conversation with you and try to sell you a product. Now, at that time you may not know whether you need that product. Or have considered is this the right product for me? The recommendation through the Royal Commission is that they actually remove the ability for insurers to cold-call you. Now, insurers actually have to wait for you to initiate that conversation because what that actually means, is you’re at a point where you’ve may have undertaken some research and this is the provider that you then actually want to have that conversation with, to see whether it’s the right product for you and then go on to purchase it.
Now it may come as a surprise to some people but insurers we’re not legally required to act efficiently, honestly and fairly when it came to claims handling. One of the recommendations from the Commission is that, that should actually be the case, that when a claim is made that the insurer will act efficiently, honestly and fairly when it comes to settlement negotiations, but also when they go through the claim to see whether it should be approved or not.
This is intended as a helpful guide in navigating some complex financial decisions and in no way should be treated as personal or general advice about the suitability of a product or service. We havent been able to take into consideration your specific details or situation and these decisions can be exactly that: complex. We recommend that you consult licensed financial adviser to help navigate any terms and conditions and help clarify any specific product disclosures, should you choose to proceed with life insurance.