Price isn't everything

The huge growth in ''direct'' selling of insurance, and the high-rotation television advertising allied with that, has attracted the attention of financial services regulators.

They are keeping an eye on both the quality of the products being sold and the depth of information consumers are getting.

''Direct life insurance business has been growing at a high rate and is now a significant proportion of the retail market,'' an executive group member of the Australian Prudential Regulation Authority, Ian Laughlin, told a conference recently.

''We are concerned that the quality of the products and of the business being written may be poor in some cases. We see examples of expensive products and high [policy] discontinuance rates.''

The commissioner of the Australian Securities and Investments Commission (ASIC), Peter Kell, says there's nothing intrinsically wrong with selling insurance directly, but if the consumer isn't getting independent advice then insurance companies need to ensure consumers understand the important features of the policy, including any exclusions and the ongoing costs.

The trouble is when it comes to television advertising, the message tends to be about cost in comparison to rival products, he says. ''As with all comparison advertising, ASIC would be concerned if the comparisons were being made between products that weren't similar.

In insurance, there can be critical differences between the scope of the cover or items excluded from a policy.''

This is something consumers need to keep in mind when they're looking at the policies being promoted to them, he says.

''One policy may be cheaper than another but you have to make sure, in going for the less expensive cover, that you're not losing some aspect of cover that might be important for your situation. Just because an insurance product is cheaper doesn't mean it's the right product for you.''

Recent research by ASIC into the advertising of funeral insurance highlights some of the issues.

Among other things, the research found there's confusion about the differences between prepaid funerals, funeral bonds and funeral insurance, particularly because the term ''funeral plan'' is used for all of them.

With a prepaid funeral, the consumer goes to a funeral director to pre-arrange and pay for their service.

Funeral bonds are investment products that help people save for funeral expenses, with the money released after death. They come with tax benefits and are limited to a maximum of about $11,000. However, there's no limit on the premiums you can end up paying for funeral insurance.

Live a long and healthy life and you could end up paying monthly premiums amounting to the cost of a funeral many times over.

And, as with any other form of insurance, if you stop paying premiums you lose your cover - regardless of how much you may have shelled out in the intervening years.

Kell says ASIC is ''actively monitoring advertising of financial products and services, including insurance''. In the past two years, ASIC has been involved in the withdrawal or alteration of about 120 financial services ads in response to concerns about their accuracy or clarity.

As for the sale of insurance via supermarket operators Coles and Woolworths, Kell says that so far they have tended to offer more basic products, such as contents or pet insurance. ''But we are monitoring the sector to make sure that the marketing is appropriate and the offer of products is appropriate,'' Kell says.

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