The federal government’s plan to let life insurers provide “simple” advice will be game-changing for the industry and consumers too, according to the sector’s peak body.

Council of Australian Life Insurers CEO Christine Cupitt says “something’s not right” when Australians are calling insurers about their policies but are not getting answers.

One of the most common questions relates to how a change in premium will affect coverage.

“Every day, life insurers have ... customers calling with simple questions and inquiries ... that we can’t answer under the current framework. So that experience is telling us that something’s not right here,” she told insuranceNEWS.com.au in an interview.

Insurers are not permitted to give personal advice. They can only offer general information, and Australians seeking life advice that considers their personal needs must engage a financial adviser.

“We can give them factual information ... but that is not likely to be able to help them,” Ms Cupitt said. “And we think it is important that the government moves forward with a new framework that will allow life insurers to provide ... simple answers to simple questions and provide a better standard of customer service and help and support to the customers who are calling us every day asking for it.”

The Albanese government is undertaking an advice reform program. Last December it finalised its position on the last tranche of recommendations from Michelle Levy, who headed the Quality of Advice Review.

A new class of advisers trained to give “simple” advice will be created, as recommended by Ms Levy. Customers cannot be charged fees or commissions, in line with her proposal. Additional guardrails will be introduced such as government-mandated competency standards and compliance with a “modernised” best interests duty.

Ms Cupitt says the peak body’s research found about one-third of people have considered getting advice about life insurance in the past three months, but only one in 10 have received any.

“We know just how underserved Australians are in relation to getting financial advice, particularly about their life insurance needs. We want to play a bigger role in meeting that customer need … and it will be game-changing for Australians to be able to ring their life insurer with simple questions and get simple answers in real time at no additional costs.”

Asked if consumers will be confused by the term simple advice, Ms Cupitt said: “It’s very important that customers understand what they’re getting when they approach their life insurer for help. It will be very clear that any advice or information or help that we provide is in relation to the insurer’s own products and not a comparison with the rest of the market.”

While insurers have welcomed the planned change, financial advisers have been more cautious. Financial Advice Association Australia CEO Sarah Abood told insuranceNEWS.com.au it is critical that the education standard for those who provide financial advice in any form remains “high and appropriate” to the scope of advice that will be provided.

Ms Cupitt says life insurers will “complement the important work” of advisers. 

“It’s not intended to get in the way of financial advisers,” she said. “The kind of service that customers are telling us they want is a very different service and experience to what they would get going to see a financial adviser.

“Most importantly, life insurers providing this service will only happen if people ring us, it will only be advice and information and help in relation to their products.”

Ms Cupitt, who appeared last Thursday before a Senate committee, said financial advisers do an incredible job helping Australians with personalised and holistic financial plans.

“But there aren’t enough of them, with just 1000 nationally who regularly help people navigate life insurance products,” she said.