ASIC has released a consultation paper as it considers whether to impose a ban on unsolicited telephone sales of direct life insurance.
Before making its final decision, the regulator is seeking views from all interested stakeholders on its proposition, which includes the banning of both direct life insurance and consumer credit insurance telephone sales.
ASIC notes it announced in August 2018 that it would restrict unsolicited sales of direct life insurance after it found a link between outbound sales calls and sales conduct issues, including pressure selling (see ASIC Report 587). Last week, the regulator also released its Report 622 on Consumer credit insurance: Poor value products and harmful sales practices.
ASIC Commissioner Sean Hughes, who commenced in his role in December 2018 noted, “…It is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase.”
…we are concerned that consumers will continue to be preyed upon by peddlers of inappropriate insurance products
Commissioner Hughes added that such a ban is consistent with the Financial Services Royal Commission recommendations, and will provide consumers with further protections from misselling practices now, ahead of wider law reform by Government: “Without such a ban, we are concerned that consumers will continue to be preyed upon by peddlers of inappropriate insurance products, using pressure sales tactics,” said the Commissioner.
In its release, ASIC notes the Banking Royal Commission recommended that the law should be changed to clearly prohibit unsolicited sales of superannuation and insurance products. It says the Government has committed to implement this recommendation, but in the meantime, ASIC says its ban will protect consumers where it has identified ongoing sales issues and has evidence of consumer harm…
The regulator advises consultation is open for a period of six weeks, with submissions due by 29 August 2019.
Will this include a ban on mortgage brokers selling personal insurance under the guise of ‘general advice’ and labelling it ‘loan protection’? A third of all mortgage brokers out there are listed as Authorised Representatives of ALI Group, a company that sells these products via mortgage brokers who are not trained or licensed to provide personal advice.
They, ALI Group, state brokers are not providing advice…tell me how a broker can provide a quote and fill in an application without knowing the client’s personal details? This is an indictment on the mortgage brokering industry who consider themselves professionals. A professional would not knowingly sell products they are not trained to sell but they continue to do so even after all these reports state the products and tactics are in appropriate. Brokers selling insurances is akin as accountants writing loans…brokers have an issue with accountants doing this but they don’t see an issue in selling insurances themselves. Brokers really need to review their profession, bring in ‘best industry duty’ e.g. what is best interest for the client and not their back pockets, and stick to what they know…which is filling in applications.
Even if this ban comes into effect, direct life insurers will continue peddling their low quality products by citing that their sales process is not unsolicited – i.e. they will state that they advertise and potential customers call them as a result. Having said this, the second paragraph in the above articles does say that ASIC’s proposition includes a ban of direct life insurance sales. Does that actually mean they are looking at banning sales of all direct lifeinsurance, regardless of the sales process? Can someone clarify or could RiskInfo ask ASIC to what extent their proposed ban covers
Another point of concern is that Sean Hughes states “it is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase.” I agree! But as we know, it is only the qualified and licensed adviser who can help the consumer through this process. But of course, how will this happen if there are no risk specialists left?
I think the title gives it away. Paragraph 2 – “direct life insurance [telephone sales] and consumer credit insurance telephone sales’
This issue can be resolved very quickly and easily by ASIC stating there is no such thing as “general advice’. The word ‘advice’ means advice is being provided in accordance with fully understanding what the customer needs, currently has and requires via a proper recommendation. If ASIC believes that complex insurance products need to be explained and recommended, they should then move urgently and make the distinction between advice and simply providing information. This will resolve pretty most of the problems that have occurred via direct selling and, the companies that still deal in the direct space would all have to conform and provide advice. This would intern increase their distribution costs and therefore would no longer make their business model viable. How can it be today that a direct group who provide no advice get paid the same remuneration as someone who does provide full advice. It’s not on and ASIC need to fix this urgently.
Direct marketed insurance products aren’t complex though and that’s why they have gotten by on general advice until now.
ASIC have said that the Best Interest Duty should apply to all Australians and clearly, that has not been the case when it comes to how Direct Insurance policies have been sold.
The playing field has been set so Life Insurance advisers are playing with both hands tied behind their backs and as the figures are starting to show, if you make it too hard, then there will be implications, which are, client outcomes are getting worse and will continue to get worse, while competition is being strangled and the process is bogged down by complexity and red tape.
I can only hope that the Life Companies are starting to realise that what we said would happen, is happening and they can now start proper dialogue with ASIC that involves telling the real truth.
Fully endorse all these comments. I have been banging on about the perils of GENERAL ADVICE since 2004, but ASIC have to wait until Hayne produces examples. Where have you been ASIC? Oh, I remember, Mr Metcalfe was off on a frolic endorsing the CPA owned dealer because they charged fees on risk. Advisers have been pointing out the fallacy of allowing life insurance to be sold under 2 completely different regimes, at peril to the consumer. And the practices of mortgage brokers selling life risk under GENERAL ADVICE are just appalling
Pardon my scepticism but this column might be a bit misleading as they ( ASIC ) are only looking at it at this stage
You can bet the life insurers promoting this will fight a lot harder than they did for advisers to keep some form of direct sales operating it too beneficial to them
Let’s see how it unfolds ? I doubt anything will happen before 2022
How can we have a ban on unsolicited sales calls on just one industry sector? Surely there are ‘poor outcomes’ for customers of all industry’s who are sold products through unsolicited sales calls.
It’s the sales process, incentives and tactics that are the problem and these are part of the “Sales” profession/industry – not specific to Life Insurance or a particular product. If the government is going to look at this seriously then I can’t see how it cannot apply a ban on unsolicited sales calls period.
Comments are closed.