{"id":27658,"date":"2014-10-09T09:35:04","date_gmt":"2014-10-08T23:35:04","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=27658"},"modified":"2024-09-25T14:28:43","modified_gmt":"2024-09-25T04:28:43","slug":"asic-life-insurance-advice-review-unacceptable-level-of-failure","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2014\/10\/09\/asic-life-insurance-advice-review-unacceptable-level-of-failure\/","title":{"rendered":"ASIC Life Insurance Advice Review – ‘Unacceptable Level of Failure’"},"content":{"rendered":"

Australia’s life insurance advice sector has been placed on notice by ASIC following the release of a report that identifies ‘… an unacceptable level of failure’ by advisers to comply with the laws relating to appropriate advice and prioritising the needs of the client.<\/p>\n

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\"ASIC<\/a>
ASIC Deputy Commissioner, Peter Kell, has placed Australia’s life insurance advice sector on notice to improve its standards<\/figcaption><\/figure>\n

In a damning assessment, ASIC’s Review of Retail Life Insurance Advice<\/a> found that more than one third (37%) of its sample of 200 advice files were considered to have failed to comply with delivering appropriate and compliant client advice.<\/p>\n

…the life insurance advice sector needs to improve the quality of advice<\/p><\/blockquote>\n

The regulator says the life insurance advice sector needs to improve the quality of advice and ensure that the interests of consumers are given priority.<\/p>\n

Part of ASIC’s review included an investigation to the reasons for the current high level of lapse rates in Australia, which are impacting the industry’s sustainability.\u00a0 It identified three main causes:<\/p>\n

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  1. Product innovation by insurers, such as changing actuarial assumptions at underwriting or the redesign of key policy features such as definitions and exclusions, which leads to the repricing of policies<\/li>\n
  2. Age-based premium increases affecting affordability<\/li>\n
  3. Incentives for advisers to write new business or rewrite existing business to increase commission income<\/li>\n<\/ol>\n

    The report also identifies a correlation between high up-front commissions and the degree of non-compliant advice being delivered. It says this includes’… situations where the recommendation is to switch products.’<\/p>\n

    ASIC Deputy Commissioner, Peter Kell<\/strong>, has urged the life insurance industry to “… consider how remuneration and compliance practices can better support good quality outcomes for consumers.”\u00a0 In doing so, the report makes a number of specific recommendations for both insurers and licensees:<\/p>\n

    Recommendations for insurers<\/strong><\/p>\n