The life insurance industry needs to stop “overcooking problems” as, from a consumer perspective, it has been good over the last few years with only a couple of speed bumps, according to a lawyer.
Speaking at the Financial Services Council’s (FSC’s) life insurance summit, Berrill and Watson principal, John Berrill, said life insurance claims in group insurance in superannuation for consumers had been quite successful over the last few years.
Berrill said the success rate of claims in group and retail income protection insurance was high and that timeframes for claims had come down.
“There have been some bumps in the road – like activities of daily life having no place in group insurance in super. They have a place but not in group insurance and that’s a problem,” he said.
“The timeframes issue is more the fact that the life code is very aspirational and the Australian Prudential Regulation Authority data shows its coming down from a consumer perspective.
“But my issue is where this is going? Have we gone too far?”
Berrill noted that APRA data had also found that in retail insurance many claims had been paid and the loss ratio to the industry was unsustainable.
“The crashing interest rates are affecting investment returns and affordability. This is a serious issue and if it keeps going it will be unsustainable,” he said.
Berrill said the industry was like a pendulum that swung too far when things went bad and swung back again.
“There’s been too many wide pendulum swings and we need to go against that. Policy design is going to be really important. My concern is for consumers, especially for people with disabilities when their working lives get cut short and need government support,” he said.
“Life insurance is very important and we need to get the mix right.”