Why Junk Insurance is not Life Insurance

Recent coverage of the Banking Royal Commission has highlighted that some financial institutions failed to meet their own standards when it came to selling insurance that was unsuited to their customers’ needs.

This so-called ‘junk insurance’ relates to low-cost add-on consumer insurance products, such as credit card insurance and loan insurance that, in many instances, customers were ineligible to claim on.

‘Junk insurance’ is fast gaining currency in the media and is being applied to include low-cost life insurance products such as some funeral insurance and accidental death cover products sold direct. This is due to high-pressure selling techniques used by very few companies.

The result of the media coverage is a decline in trust in the direct life insurance industry and potentially people deciding not to take out or renew their cover when they need it most.

Balancing the media hype

Whilst there is no doubt the life insurance industry needs to do better and live up to its social contract with the community, it’s important to balance the rhetoric by not losing sight of the enormous value that the industry contributes – such as over $9 billion in claims paid in 2017 alone – or almost $25 million every day.

Direct life insurance accounts for approximately 10% of the market and the claims paid each day to thousands of people to help them get financially back on their feet.

The types of Life Insurance that are available direct is similar to that offered by advisers i.e. term life, Income Protection, TPD and Trauma cover. The main differences are that the features may vary and the amount of cover. The other difference is that cover bought direct is usually only partially underwritten.

Providing Life Insurance direct also provides customers with a very valuable alternative option for obtaining cover through other channels.

In this context, it would be hard to consign Direct Life Insurance to the ‘junk insurance’ category.

The NobleOak difference

NobleOak offers quality award-winning Life Insurance direct to Australians combining quality, and fully underwritten cover with outstanding personal service.

We operate with a genuine desire to better protect our clients and their families and ‘Integrity’ continues to be at the heart of what we do.

As the Royal Banking Commission hearings continue, the outcomes and changes to come will no doubt ensure that all customers have greater confidence in the life insurance industry in Australia.

 

Sources:

https://www.afr.com/business/banking-and-finance/financial-services/banking-royal-commission-how-cbas-matt-comyn-failed-to-stop-junk-insurance-20181120-h1840r

https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-250mr-asic-s-review-of-direct-life-insurance-finds-high-cancellation-rates-and-poor-claims-outcomes/

Margaret Rochford

26 November 2018 - 5 minute read