Insurance policy co-ownership, where a company picks up the monthly premiums in return for a portion of any future claim benefit, is a developing business in Australia. However, it may put some financial advisers there on the back foot.
MBS Insurance Founder, Kris Mason, says Australia’s Best Interests statute means clients whose circumstances may make them eligible to policy co-ownership must be made aware of the co-ownership option by their adviser.
He says that with the emergence of policy co-ownership as a valid option for some clients who would otherwise cancel their lump sum life insurance policies, any adviser who does not make their client aware of this possibility may risk exposure to future action from the client or their intended beneficiaries.
Policy co-ownership has re-entered the mainstream life insurance advice conversation in Australia since the emergence of policy services firm, iExtend, in early 2022 (see: Launch of iExtend).
According to Mason, all advisers should have a uniform cancellation process for all options available to their clients. When clients consider cancelling their lump sum life insurance policies, they often face emotional challenges that impact not only them but also their beneficiaries.
Mason says the advisers operating within MBS’s growing national network of risk advice businesses, should be knowledgeable about all the available options as an alternative for clients wanting to cancel their term life insurance policies.
Not only should they be aware of the option, but given the Best Interests statute brought in as a part of the Future of Financial Advice reforms in 2012, Mason cautions that: “Advisers don’t want to find themselves in a situation where a spouse asks why the possibility of policy co-ownership was not offered to their deceased partner seeking to cancel their policy.”