In the wake of Shield and First Guardian, the government has busied itself with the Delivering Better Financial Outcomes (DBFO) raft of legislation, though there has been no tangible movement on this in over a year. However, the government has set its sight on lead generation as an area that needs reform.
A consultation paper on the proposed reforms linked lead generation practices to the Shield and First Guardian collapse, saying it demonstrated the role it can play in shaping consumer engagement and potentially open them to harm.
However, its that ability to shape consumer habits and inform that has the Council of Australian Life Insurers (CALI) concerned any potential ban could be an overreach, particularly in the world of life insurance.
According to CALI chief executive Christine Cupitt, the ban runs the risk of reducing customer choice restrict access to life insurance.
“Life insurance lead generation plays an important role in helping customers access information, compare products and obtain life insurance protection,” Cupitt said.
“A blanket ban for life insurance risks limiting legitimate information and connections that support customers to build their financial safety net.”
The biggest concern for Cupitt is that the ban would prevent life insurers from receiving customer enquiries from comparison websites, a popular, convenient and safe way for consumers to access basic information about premiums that may suit them.
“One in two Australians want personalised advice about life insurance and more people are turning to online tools, including market comparison sites, to learn about life insurance.”
The lead generation from these websites is an effective way of getting this advice and can help guide customers into a far more comprehensive conversation with a risk adviser.
CALI therefore has highlighted it will be arguing for an exemption from any lead generation ban, saying an exemption should apply where:
- Lead generation is undertaken for the sole or dominant purpose of promoting, referring or facilitating access to a life insurance product or service; and
- The initiating party complies with obligations under the Corporations Act, ASIC Act, Privacy Act and other consumer protection laws.
“The government should not cut off safe, regulated pathways that help Australians access life insurance,” Cupitt added.
“Australians need easier access to life insurance, not more barriers. This approach keeps reforms tightly focused on harmful conduct while preserving legitimate customer access to life insurance protection.”
Other professional associations, such as the Financial Advice Association of Australia (FAAA), have also called into question the validity of a total ban on lead generation.
General manager of policy, advocacy and standards Phil Anderson has stated his belief that while lead generation is likely something that needs examination in the wake of Shield and First Guardian, it is does not get to the core lesson that needs to be taken from the debacle.
“I have no doubt that lead generation is an area that needs to be looked at, and the proposals are worthy of consideration,” Anderson told The ifa Show podcast.
“But we need to better understand exactly what went on before we decide what needs to change.”
He added: “We’ve certainly seen examples where advice was being provided without the adviser actually speaking to the client, which is clearly unacceptable. That points to poor conduct rather than a gap in the rules.”
Conversely, the Super Members Council (SMC), a group that advocates for consumers rather than professionals, supports the banning of “predatory” super switching ads, saying everyday Australians back their position based on research.
“Disturbingly, almost two in three survey respondents – or 63 per cent – were not aware that these types of ads were used to switch Australians out of their super funds into the collapsed Shield and First Guardian funds that led to 12,000 people losing $1.2 billion of their super savings,” the SMC said.
The SMC believes that the failures of the Shield and First Guardian were exacerbated by gaps within consumer protection laws that allowed for these super-switching ads to run.
“Those events show how aggressive lead generation practices, high pressure sales tactics and gaps in oversight can be used to funnel Australians out of safe, high-performing, low-cost, regulated super funds and into unsuitable or unsafe super products, losing their life savings and undermining public trust in super,” the council said.
