Onus on advisers to address underinsurance

Following research suggesting that advisers believe their own clients are underinsured, a panel of advisers agreed that regardless of whether commissions on life insurance within superannuation were banned, the onus will remain on advisers to ensure the best outcomes for clients, rather than relying on Government or an external body.

Superannuation and investment product provider Wealthtrac surveyed 36 of its independent advisers, and more than half of those believed that less than 40 per cent of their clients were adequately insured, and no adviser said that more than 80 per cent of their clients were adequately insured.

Cost and a lack of education around insurance were given as the major reasons for the lack of insurance, and the panel of advisers assembled by Wealthtrac to discuss the underinsurance issue yesterday agreed that the onus was squarely on advisers to make sure that clients understood the importance of life insurance.

“It is our job, there’s no excuse for not having that conversation with the client,” said SuperWise Financial Services director Mark Hawes, although he conceded many clients presented a barrier in those initial conversations and believed that insurance was too expensive or unnecessary.

“It’s up to the industry – the product providers, the platform providers, the advisers, the paraplanners, the underwriters,” said Wealthtrac chief executive Matthew Johnson.

“We’re overgoverned as it, we’re the most overgoverned nation in the world. The industry, not just the industry super funds but the industry should take more responsibility. [Clients] will never know as much as we know, we’re not asking them to, so we’re the custodians on their financial health,” he said.

Members of the panel said there was an endemic problem in Australia for people to take the ‘she’ll be right’ attitude towards insurance, but agreed advisers needed to be proactive in addressing client understanding of insurance.

“Advisers are contacting their clients, they’re pursuing clients for more information but unfortunately clients and especially within Australia can be quite apathetic, the ‘she’ll be right mate’ attitude is in our culture, we don’t foresee negative issues arising,” said Johnson.

Another factor potentially driving the current underinsurance issue was the potential for people to think they were better covered than they actually were – particularly those without a financial adviser, according to the panel.

“The false sense of security is what’s going on out there in the marketplace,” Johnson said.

“People think they’ve got something in their super fund, and at worst the Government will look after it. There are a lot of people like that, they’ve got a false sense of security, they’ve got no adviser [and] they’re thinking ‘I’ll be OK.’”

Two thirds of advisers surveyed said that if life insurance could be offered via a platform and encompassed the benefits of retail insurance, that would have a positive effect on insurance levels.