Brokers have called for tighter regulations on who can sell insurance after Woolworths was yesterday forced to change its car insurance adverts for failing to clearly state the differences in policy coverage.
Woolworths claimed it can save customers money on comprehensive car insurance but its disclaimer did not highlight that the cost savings come with a lower value on the policy.
In response to ASIC's concerns, Woolworths said: "We accept ASIC’s feedback and will take this into account when we run this sort of marketing in the future."
However, the news has intensified broker concerns over direct sales tactics, including those employed by supermarkets.
“Buying insurance via supermarket implies that the only consideration consumers make about the product is price,” says Andrew Faber, account manager at MGA Insurance Brokers.
“If you’re buying from a supermarket you’re probably not taking the time to read a 50-page product disclosure statement at the point of sale and no one is taking the time to tell consumers what the difference in cover is.”
David Summers, senior insurance broker at Markey Insurance Brokers, said the issue lay with supermarkets not having the skills to adequately educate the client.
“Supermarkets are not trained to provide insurance nor are they required to have any expertise,” he says. “They don’t understand the products they are selling. It’s not their livelihood. It’s just another revenue generator.”
Summers is concerned about the impact it has on the public’s perception of the insurance. “When claims don't get paid because of poor or no advice then the whole industry will suffer,” he says.
He believes the solution is education. “We need tighter guidelines on who can offer insurance products. I would like see people who want to sell insurance products requiring a minimum level of qualifications. Brokers have diplomas and certificates and ongoing training, but other direct insurance sellers don’t.”
Faber also says the onus is on the distributor and not the underwriter. “There needs to be a stronger obligation on the seller of insurance to make sure the consumer fully understands what they are purchasing. If a claim is denied, the onus is on the seller to demonstrate that they have given the buyer an adequate overview of what they are buying. If the seller can’t, they should be on the hook for a claim.”
"The insurer has every right to choose what do insure and what not to cover - that creates competition and there is a place for [supermarket] insurance. It's cost-effective and covers major disaster perils."
Some suggest the answer is twofold – regulation and public awareness. Under the Future of Financial Advice Reforms, brokers are no longer able to move clients to a new policy unless there is a proven benefit. Broker champion Kate Fairley says this should apply to supermarkets too.
“Why haven’t they changed the legislation to ensure consumers understand what they’re losing in cover when they choose a direct insurance product based on price alone?
She adds: “Brokers individually are too small to raise awareness. There needs to be a larger campaign among the industry organisations.”
The National Insurance Brokers Association is in the planning stages of a major community awareness campaign, working closely with the Insurance Council on the broker content for their own campaign and Fairley at Get Informed.
“The industry as a whole appears to be gearing up its efforts to highlight the true value of insurance – and a broker’s role within that – to different audiences,” says NIBA professional development executive Linda Evans. “As our own campaign takes shape, we’ll be working closely with key stakeholders across the insurance and broking sectors.”