You web browser may not be properly supported. To use this site and all its features we recommend using the latest versions of Chrome, Safari or Firefox

We are continuing to serve clients during the COVID-19 pandemic More Info.

An ASIC review into bad advice in the life insurance industry confirms what our clients have been telling us for years, many insurance advisers don’t properly explain their advice to their clients.

ASIC’s review of a sample of advice files found more than a third of customers received advice so bad it was unlawful. ASIC said that its results indicated that many advisers giving post-FOFA advice may have prioritised their own interests in earning commission income ahead of the interests of the client in getting good quality advice.

In my years of acting for clients who have received bad advice from their insurer, I’ve found that many advisers don’t properly explain the catches hidden in the fine print of some of the policies they are selling.

Many people don’t realise that switching insurers can increase the risk of losing insurance cover entirely, or of having a policy cancelled later. Switching insurers increases the risk that a claim will be rejected for a pre-existing condition, and also increases the risk that a policy will be cancelled for non-disclosure of some aspect of a customer’s medical history.

The ASIC report also found advisors gave ‘too many generic warnings that were insufficient to engage the client in understanding’ the risks of switching insurers.

In some instances, advisers sell unsuitable insurance policies motivated by the commissions they get paid. This is a huge problem in the industry and in the end, it is the insurance consumer who suffers.

Life insurance customers can protect themselves by asking their insurance advisors some key questions:-

  1. How much will you be paid if I sign up to this policy?
  2. Is there a comparable, cheaper policy? If so, how much would you be paid if I bought that policy, and why are you not recommending it?
  3. Can you give me a quote for the same amount of cover with at least three different insurers?
  4. Why are you recommending this policy, rather than another insurer’s policy?
  5. What do I have to prove to be paid the benefit?
  6. What are the exclusions?
  7. What are the risks of me signing up to this policy?
  8. Will my premiums go up over time? How much by?

Insurance advisors have a duty of care to their customers, and customers who are given bad advice may have an action against their advisor, or their insurer.

For more information, visit Superannuation and Insurance claims.

The contents of this blog post are considered accurate as at the date of publication. However the applicable laws may be subject to change, thereby affecting the accuracy of the article. The information contained in this blog post is of a general nature only and is not specific to anyone’s personal circumstances. Please seek legal advice before acting on any of the information contained in this post.

Thank you for your feedback.

Related blog posts

Superannuation and Insurance
Understanding changes to your superannuation

There have been a lot of changes to our superannuation lately, some of it stirred on by the COVID-19 pandemic, others have been in the works for a while now. With all these changes it is understandable that there’s a lot of confusion out there about what is happening with our hard earned super. This article aims to answer some of your questions. On 1 April 2020 the Putting Members’ Interest First legislation came into effect. The legislation is designed to stop you from paying fees and insurance premiums if you have a low balance or if you are under 25 years old. Most superannuation funds are required to provide their members with insurance cover to ensure they’re covered in the...

Superannuation and Insurance
Accessing your super early may cause you to lose insurance benefits

With so many people doing it tough following the bushfires, there has been some debate around whether people who’ve lost their homes should be able to access their superannuation early. It is hard to see the point of holding onto thousands in savings in your superannuation fund, if you can’t feed your children, provide accommodation or send them back to school with the books, stationery, uniforms and other resources they will need. It’s worth understanding the consequences of draining your super account to invest in something as significant as rebuilding your life now. Doing this could cause you to lose all insurance benefits available to you via your super membership. This is the...

Superannuation savings insurance
Consumer and the Law
Banking Royal Commission legislation introduced

On 28 November 2019, the Government introduced legislation in line with the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The legislation is designed to provide further protections for consumers and small businesses and is set to be passed in early 2020. Below is an overview of the proposed legislation. Click here for a recap of the Banking Royal Commission from our Head of Class Actions, Ben Hardwick. Under the proposed legislation, mortgage brokers will be required to act in the best interests of consumers when providing credit assistance. That means where there is a conflict of interest between the consumer’s...

Gavel and weights two people talking resized

We're here to help

Start your online claim check now. Or, if you have a question, get in touch with our team.