Life Insurance Commissions & Underinsurance

It is rare for me to offer comment on life insurance. The issue of under insurance however effects all forms of insurance and as a long term advocate for educating the insuring public on the false economy of this, I offer the following.

The vast majority of people in Australia do not have enough life insurance to cover 1 years expenses for their family. It is estimated by the Life Insurance Industry that only 4% of Australians have sufficient life insurance.

So the decision to remove commission on life insurance sold within superannuation is seen by many, including me as being a unwise decision on the part of the Federal Government.

When someone does die without sufficient life insurance it puts an enormous stress on any dependant family. I grew up in such a family. It also puts a strain on Government in the form of welfare payments unless, like my mother had to do and work 14 hours a day to make ends meet. Most would just stay home and collect a widows pension.

If there is no incentive for the financial planner to offer life insurance products, human nature being what it is, it simply will not happen or the planner will simply move the insurance outside the superannuantion plan. I am not sure what benefit the government see in this.

Thankfully the opposition and at least one of the independant candidates is not supporting the changes and the last I heard was that at the very least the changes will not be introduced till 1 July 2013 and not 1 July 2011 as first suggested. I also understand that some life products will be allowed. Similarly changes to the need for a client to opt into an arrangement with their financial planner is being challenged.

A lot of people have a lot at stake. The banks and life insurance industry certainly do but more importantly so does Australian families and Australian tax payers.


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