The FSC also believes the Private Health Insurance Act should be amended so that insurers can fund medical treatment for claimants, which will increase return to work rates.
FSC chief executive John Brogden said the changes will help insurers manage costs and generate better outcomes for claimants.
“They will also assist insurers to reduce spurious litigation, improve welfare of individuals by allowing them to remain engaged in the workforce and ultimately contribute to economic growth through higher labour force participation,” said Mr Brogden.
The FSC is also advocating several non-regulatory changes for the financial services industry, including an improvement in the quality and consistency of data shared by the industry and an industry fraud bureau similar to those in Canada and South Korea.
It has also proposed the introduction of a medical impairment bureau.
Mr Brogden believes the life insurance industry plays an important role in reducing government outlays.
“Underinsurance has a significant impact on the Federal Budget, as many of those with insufficient insurance ultimately draw on the government through various pensions,” said Mr Brogden.
“Life insurance can be the private sector solution to the increasing budget costs of welfare, just as superannuation is the private sector solution to the costs of an ageing population.”
