ASIC was unambiguous in its assessment, revealing an “unacceptable level of failure” in the life risk sector.
Having reviewed more than 200 files from “large, medium and small” licensees, ASIC determined that 37 per cent of advice reviewed “failed to comply with the laws relating to appropriate advice and prioritising the needs of the client”.
In addition, the report found that “high upfront commissions are more strongly correlated with non-compliant advice, including in situations where the recommendation is to switch products”.
“The industry as a whole needs to consider how remuneration and compliance practices can better support good quality outcomes for consumers,” said ASIC deputy chairman Peter Kell.
Stopping short of recommending an upfront commissions ban, ASIC recommended that licensees “ensure that remuneration structures support good-quality advice that prioritises the needs of the client; review their business models to provide incentives for strategic life insurance advice; and increase their monitoring and supervision of advisers with a view to building ‘warning signs’ into file reviews and create incentives to reward quality, compliant advice”.
ASIC also makes a number of recommendations to life insurers, including that they address “misaligned incentives in their distribution channels”.
More to come.
