Life insurers using ‘mob tactics’

The life insurance sector has been under pressure to lift its game for years. Successive governments, parliamentary committees, ASIC and the Productivity Commission have all recommended reforms. ASIC chair James Shipton is blunt: “People are being sold products they don’t want, can’t afford, or [that] don’t perform as they expected,” he says.

But industry lobbyists have been fighting back, using shock tactics to frighten crossbench senators, circulating harrowing case files and warning that any changes will leave them with proverbial ‘blood on their hands’. Superannuation funds are required to offer life insurance to most members, but this obligation is poorly understood by consumers. This system has allowed insurers to profit from a variety of perverse outcomes. Change is long overdue. People without dependents or liabilities are paying for life insurance they probably don’t need. Sneaky exemptions to prevent payouts are buried in the fine print.

For low-income earners, premiums can quickly erode retirement balances. In the wake of the royal commission, the scaremongering from the ‘life insurance mafia’ is brazen. There are bills before
parliament and more royal commission-related reforms on the horizon to require life insurers to provide products that are fit for purpose.

Super Consumers Australia at CHOICE is pressing our politicians to stand up to these ‘mob tactics’.


One significant change has been in how policies are designed.

Back in the dark ages policies could accrue bonuses, and gained a net value, available on maturity or surrender.

The industry has been keen to get old timers off these products.

In one instance I can relate the details of a fixed never to increase annual payment of $29 rounded provided a death or terminal illness benefit of slightly more than $26,000 after 50 years. Alternately a surrender value of $11,000 rounded. For a total cost of the policy over 50 years less than $1,500. How did they do it?

Today the cost of purchasing any policy as a mature age holder is not only substantial, it escalates for every year you age with often uncontrollable increases. The substantial profit, commissions and overhead costs appear built into each years premium. Which reflects the significant differences in cost some may notice between insurance taken out privately, and that included in an industry super scheme. Although some of these now appear to be more profit centres than services?