FPA supports tightening insurance claims

The Financial Planning Association of Australia said in a submission to Treasury that it supports bringing insurance claims handling under the definition of financial services.

The submission, in response to Treasury's exposure draft legislation and regulations to make insurance claims handling a financial service, detailed several ways in which advice in relation to life insurance and the claims handling process could be tightened up.

The FPA supports the Royal Commission's recommendation 4.8, which stated: "The handling and settling of insurance claims, or potential insurance claims, should no longer be excluded from the definition of 'financial services'."

The association said while it wishes to ensure that advisers are able to provide necessary services to clients claiming on insurance it has recommendations in relations to some of the changes to the Statements of Claims Options that will "enhance its purpose and provide appropriate consumer protection".

First, the FPA supports the licencing obligation including a clause saying: "A person who provides financial advice to an insured and who handles and settles an insurance claim on behalf of the insurer."

The current claims handling definition captures certain financial advisers and the FPA seeks to further clarify whether the claims handling obligations capture financial advisers who are receiving commissions through the insurer.

These commissions, the FPA explained in its submission, are designed in part to retain the client to the insured to ensure assistance is available when the insured makes a claim.

"The FPA support in the implementation of alternative documentation requirements developed specifically for the handling and settling of insurance claims by insurers and insurer's representatives," the submission said.

"The FPA recommends two clear disclosure and consumer advice warnings should be provided to consumers by representatives acting on behalf of the insurer."

Those advice warnings, it said, should include that the individual is representing the insurer and the interests of the insurer not the interests of the individual making the claim.

The FPA also supported insurers' representatives being prohibited from providing personal advice about claims.

Read more: FPAFinancial Planning Association of AustraliaRoyal Commission
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