Customers are being slugged with higher fees for life insurance as companies struggle to administer outdated and sometimes ineffective cover, the Australian corporate regulator says.
Old or `legacy' life insurance policies are dragging down profits of insurers who in turn are hiking fees for customers, the Australian Prudential and Regulation Authority said in a submission to a senate economics committee inquiry, released on Thursday.
Too much red tape, tax and legal complexity deters companies from changing or scrapping outdated policies leaving them tied to outdated products which cost more to maintain, APRA said.
The submission also said a quarter of all funds under management are held in legacy products and even if customers wanted to change policies, the process could be expensive and difficult.
APRA said there was a comprehensive need to address the issue and it would support development of a mechanism to more easily change or reduce outdated policies.
