Steve Irons MP Federal Member for Swan

Tabling of PJC Report into Life Insurance industry

Mr IRONS (Swan) (12:03):  On behalf of the Parliamentary Joint Committee on Corporations and Financial Services I present the committee’s report on its inquiry into the life insurance industry.

Report made a parliamentary paper in accordance with standing order 39(e).

Mr IRONS:  by leave—The inquiry into the life insurance industry was referred by the Senate on 14 September 2016 to review:

  1. the need for further reform and improved oversight of the life insurance industry;
  2. assessment of relative benefits and risks to consumers of the different elements of the life insurance market, being direct insurance, group insurance and retail advised insurance;
  3. whether entities are engaging in unethical practices to avoid meeting claims;
  4. the sales practices of life insurers and brokers, including the use of Approved Product Lists;
  5. the effectiveness of internal dispute resolution in life insurance;
  6. the roles of the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority in reform and oversight of the industry; and
  7. any related matters.

I see the member for Burt here, who is on the committee. He is going to speak afterwards.

That referral was fairly tight, but as the inquiry progressed ‘any related matters’ became quite expansive. We delved into many areas of the life insurance industry, which, when the original referral was made by Senator Williams in the Senate, were raised purely on the basis that he had received many complaints in regard to the processes of claims to life insurance companies. That was the initiation of this report.

 

Following the referral, the committee advertised the inquiry on its webpage, inviting submissions from a wide range of relevant stakeholders. Through this process, the committee received 77 submissions and a number of supplementary submissions. Once submissions closed on 18 November 2016, the committee held seven public hearings—one in Sydney, one in Melbourne and five here in Canberra—to provide relevant stakeholders and organisations the opportunity to provide evidence to the committee.

Life insurance has a noble purpose: to provide financial protection to policy holders—that is hardworking Australians—in times of immense need and financial and emotional distress. In doing so, the life insurance industry forms a significant part of the financial services sector in Australia. Again, the member for Burt will agree with me that there are many expectations of life insurance. But there are different parts of stakeholders, and there are different parts of the community, who have different expectations of what life insurance should provide and shouldn’t provide, and we found that out during the inquiry. Despite this, there are sections of the industry that can and must do better in delivering the protection they promise whilst remaining financially viable long into the future securing policies of current policy holders

As at September 2017, there were 29 life insurers in Australia. The big four banks each owned life insurance businesses until 2017, when some of those life insurance businesses were either completely or partially sold. Whether that was as a result of this inquiry, I couldn’t exactly say, but I know the probing by the member for Burt had many stakeholders and life insurance companies on the edge of their seat.

For the benefit of the House, the committee has taken a broad view of the life insurance industry covering direct retail and group life insurance products, including life cover, also known as life insurance or death cover; total and permanent disability, or TPD; trauma cover; and income protection.

The committee’s inquiry has followed on from an overlap with significant reviews and legislative changes, as well as the ownership changes in the industry, and it was a moving feast during the time of the inquiry.

The report focuses on areas where substantial changes are required to ensure the life insurance industry is held to account in relation to effective consumer protection and industry codes of practice; the transparency of remuneration, commissions, payments and fees; the provision of advice in the best interests of consumers; group life insurance arrangements that do not disadvantage certain groups of consumers; appropriate access to personal, medical and genetic information; and a fair claims-handling practice, which should also be a timely claims-handling practice.

I’d like to take this opportunity to acknowledge and thank all of those who’ve contributed to this inquiry, be it through written missions or evidence provided during the hearings. The evidence we received provided a strong evidence base, which informed our deliberations and the report.

The areas that we did delve into were, obviously, consumer protections, the codes of practice, remuneration, commissions, payments and fees, which I have mentioned, the retail life insurance and approved product lists, group life insurance, access to medical information and genetic information—mental health played an important role during the process for all those items I’ve mentioned—and, again, the claims handling. One of the things I personally feel is important, that this industry should look at and should be targeted is the transparency and that definitions of life insurance be harmonised amongst the life insurance companies and also the fact that we can track a parcel from one side of Australia to another by going on to a website, but, unfortunately, people are putting in claims for life insurance, which need to be treated fairly, equitably and quickly, but they cannot follow the process of that life insurance claim, whether it be a TPD claim or whether it be any other form of claimed workers’ compensation.

I thank my fellow committee members for their contributions to this inquiry, which I know will effectively improve consumer outcomes and the sustainability of the life insurance industry; my Deputy Chair, Senator Deb O’Neill, who I’ve had the pleasure of working with on a number of inquiries; my parliamentary colleagues, including the member for Forde—his work on the financial services sector was invaluable—the member for Mackellar; Senator John Williams; Senator Hume; the member for Griffith; the member for Burt, who I said is in the chamber; Senator Chris Ketter and Senator Peter Whish-Wilson.

 

I would like to add a special comment and thanks to Senator Williams for his commitment to this inquiry and his commitment to represent the people who came to him with claims about being treated unfairly by the life insurance industry. For as long as Senator Williams has been in the Senate he has been a strong advocate for improvements to this industry. I would also like to pass on my sincere thanks to the committee secretariat, particularly Patrick Hodder and Jon Bell, for the enormous amount of work they’ve put into this inquiry. This is the second major inquiry I’ve had the privilege of working with this committee on. The previous one we did was the whistleblower inquiry, which is equally important to many Australians. I would like to thank those two gentlemen for the professional and dedicated approach they’ve taken to handling this inquiry. And it would be remiss of me to not thank Hansard, broadcasting and the staff of committee members. I am very proud of the informed recommendations contained in this report, and trust it provides a constructive way forward for the life insurance industry. I commend the report to the House.

Contact Steve

Send Steve an Email

08 9355 0099 (Office)

08 9355 0199 (Fax)