ASIC’s review of the direct life insurance industry found three in every five direct life insurance policies sold were cancelled within three years, with one in five cancelled before the end of the cooling off period and one in four of the remaining policies cancelled within the first 12 months.
ASIC chair James Shipton said these high cancellation rates, alongside poor claims outcomes, suggested direct insurance products either don’t perform as expected or are being sold to people who don’t want or can’t afford them, often through inappropriate sales techniques.
However, the FSC noted in a statement that ASIC’s review found the improved conduct of a number of firms appears to have been influenced by the FSC’s code of practice.
“For many firms, conduct had improved, and the introduction of the code by the FSC appears to have played a role in improving sales standards, particularly where it sets clear and specific expectations,” the report said.
Despite this, the FSC said it was “disappointed the report has uncovered continuing practices” among some firms that have led to poor client outcomes.
“The second iteration of the Life Insurance Code of Practice is well underway and the FSC is working with ASIC, consumer groups and other industry stakeholders to further enhance consumer protections in the code,” the FSC added.
“Direct life insurance is an accessible and simple means of getting life insurance cover for many people. However, for consumers with a complex medical history or with other questions or concerns about appropriate cover, they should contact a financial adviser.”
Out bound calls from call centres are always going to involve some form of high pressure selling regardless. Throw in “ no forms or blood test” , because it’s underwriten at claim time, and what do you expect. This type of product is aimed at the lowest common denominator of society. Of course it’s going to be fraud with issues
You couldn’t write better comedy than this! The corrupt practices of both ASIC and the FSC which created the LIF and the cartel FSC members all gouging existing customers with price increase forces more customers to go direct.
ASIC are now condemning direct sales practices for inferior products and poor selling practices and the FSC’s response is the Life insurance code of practice which has little benefit to customers and no enforcible powers for breaches and is therefore breached every day.
Lets hope the royal commission start getting some answers out of this corrupt cartel FSC mob when they take the stand.
The questions that need answering by the FSC:
1. Why did the FSC wait until after the LIF was passed before providing ASIC with correct lapse data which proved (as admitted by ASIC) that churn was in fact not an issue with advised sales?
2. Why did the FSC members all start raising premiums on exiting customers business while reducing new business premiums thereby actively encouraging a churn issue that was not there in the first place? There is obvious cartel behavior by FSC members.
3. What fines have been imposed by the FSC on its members for breaches of the Life insurance code of conduct e.g. Comminsure and the direct sales members ASIC have admitted to bad sales practices, lower claims payments and appalling lapses?
Come on Royal Commission lets get some answers from the FSC.
ODwyer and the FSC pulled one of the great con jobs with the so called Adviser Churn problem, that ASIC now confirms was almost none existent, so the FSC / Banks & Insurance companies could make Advisers lives more difficult and thus they can easily flog more Dodgy Direct Life Insurance.
Direct Life Insurance is not worth any more than the crap over the phone sales pitches that are used to flog it.
O’Dwyer and FSC you are complete disgraces.
Those flogging Dodgy Direct Life Insurance and those supporting it should be banned.
Direct Life Insurance = modern day snake oil.
ASIC and FSC = dumb and dumber
And ASIC is concerned at the very small lapse rates with advised policies? 60% lapse rate in 3 years…WOW! these trends will only get bigger as ASIC bullies out advisers from the industry
Ok, so the sales culture improved “dramatically” with a “code of practice”, there goes the degree argument and Ethics exam. Seems all we need is a “Code of practice”……
AND PIGS FLY
well who’d a thunk it? If this isn’t the most damning evidence yet of the true value of advised (Specialist) Risk then what is? Life insurance is still a sales process, irrespective of the (Important) advice aspect of it. anyone who says otherwise is (to paraphrase Daryl Kerrigan) “Dreamin” !!
leyts see what happens now .