Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

I would like to associate myself with the remarks just made by the member for Griffith. I think this report really demonstrates the great work that is done in this parliament across party-political lines, where committees take the time to thoroughly investigate a particular issue or a set of concerns that are raised from whatever the source may be and produce a report such as this, which has covered a wide range of issues on a bipartisan basis. I think it is a great testament to the quality of the work and the willingness of the committee to work together to get this outcome. I think it's a pity that more of the work that is done in this place is not seen by the public at large, instead of some of the other things that they see.

The reason this inquiry is so important is that insurance is incredibly important to the lives of Australian people. And, at the end of the day, that was what the focus of this inquiry was about. It was about how we seek to craft a set of recommendations that will improve the operation of the industry for the benefit of the Australian people, particularly at a time when they need it. We have spent a lot of time over the last few years focusing on the provision of advice, the initial up-front component at the beginning of a process with the life insurance industry or the investment industry—for the sake of this contribution, we'll focus on the life insurance industry. The advice part is incredibly important, because there is a requirement for advisers to ensure that the products they recommend or the strategies they recommend are in accordance with the client's best interests. We never know really, at the outset, whether that's the case, but where the rubber hits the road is at the time of claim. This, in part, was one of the catalysts for this inquiry in the first place—issues in the claims process as identified in the media. That is where the focus of this report has been. How do we improve the claims process? How do we improve the quality and the clarity of the terms and conditions within life insurance or income protection policies? They are very complex and wordy documents and there are a variety of definitions across all of the 29 different companies that provide insurance in Australia. That is where the complexity arises.

I can well understand the difficulty many Australians have in understanding what they actually have in their insurance policy. I think it's fair to say that we in this place know the complexity of these documents and how much reading is involved, and I'm sure that even we would admit that, with all of the reports and other things that we get across our desks, we don't necessarily read everything, because it's actually impossible to do so. I would suggest that it's the same for consumers. They get documents that are wordy. They are legal or are legalistic in their wording. They don't take the time to read through them in great detail. And, even if they do, they'd probably find them hard to understand. That's what some of the recommendations in here are around—improving understandability, transparency and ease of reading for consumers so that they can actually understand what they are getting in their cover. I think that is critically important. As I said, it's at claims time when the rubber hits the road, and a lot of our time was focused on how we improve that process.

One of the issues that was identified was the issue of definitions of medical conditions, and one of the recommendations specifically addresses that issue. It's the responsibility of insurance companies to ensure that the definitions in their products are regularly kept up to date, not only in retail life insurance products but also, importantly, in group life.

The media reports leading up to this particular inquiry identified a number of circumstances involving policies in a group life setting. The committee did a tremendous amount of work around: how do we improve the understanding for consumers of what insurance cover they actually have within a group life setting, particularly within their superannuation fund? The member for Griffith touched on this in her contribution. It is very, very important, because people in a very difficult circumstance in their life need to understand or have the understanding that they have some security in the event of a terminal illness or cancer or in the event of an injury where they can't work for a period of time. They need to be able to ensure that the process of protecting their financial situation is robust. Medical definitions not being up to date doesn't assist with that.

In the group life setting, we also discovered a number of instances where people actually had cover but, due to the conditions and terms within the super fund, couldn't make a claim, because they weren't getting contributions or the balance wasn't at a certain limit et cetera. So we had situations potentially where people were paying premiums on insurance policies which they couldn't actually claim on. What benefit is that to those people? They are the things that we want to see removed from the industry, because people should be getting what they pay for.

A number of the recommendations in this report focus on those issues around group life insurance about ensuring that people are getting clear information from the trustees of the super fund but also via the ATO, where possible, of not only what their superannuation account balances are but what insurance cover they have within their superannuation funds, because many people don't even know they have insurance cover. The fact that people have something they don't know about is, I think, a breakdown in the level of communication by the superannuation funds to educate their members about what they actually have in their fund.

One of the interesting recommendations, which I haven't seen much commentary on so far, is something that I have discussed at length with the industry over the years—this is more in the retail insurance space than in group life policy—and that is legacy products. Legacy products have been around for a long period of time. I think one company said they had a product from 1928 or something like that; that was when it was first written. So they have got these very old systems that don't talk to each other and that probably have old definitions and old terms and conditions. One of the issues we discussed was how we work with the industry to rationalise this book of legacy products and through that process ensure there is a no-disadvantage test to ensure that, where policies are moved to a new policy, the current policyholder is no worse off. This was looked at on the basis of putting people into newer products with better terms and conditions, reducing the cost of managing these complex, long-term books for the insurance company and, hopefully, reducing the long-term cost to consumers in Australia. I commend this report to the House. (Time expired)

Debate adjourned.

Sitting suspended from 12 : 14 to 16 : 06

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