ASIC’s review of direct life insurance sales found that “sales practices and product design are leading to poor consumer outcomes”, noting that one in every five direct policies were cancelled within the cooling off period, and a further one in four of the remaining policies were then cancelled within 12 months.
Three in every five policies sold are cancelled within three years, the report also said.
ASIC added that direct insurance also “compares poorly” with other channels, with 15 per cent of claims declined and 27 per cent are withdrawn.
“Life insurance is a long-term product but cancellation rates and poor claim outcomes show that people are being sold products they don’t want, can’t afford, or don’t perform as they expected,” said ASIC chair James Shipton.
The regulator also found inappropriate sales techniques were being used to sell direct life insurance policies.
“ASIC listened to more than 540 recorded sales calls and identified a failure by all firms to provide adequate information about important aspects of the cover, including key exclusions and future premium increases,” ASIC said.
“Four firms were also found to engage in pressure selling techniques, including refusing to send out paperwork unless a consumer committed to buy.”
However, Mr Shipton said that while “aggressive selling practices” undermine trust in the industry, direct life insurance sales “can be done well” as evidenced by past experience where businesses choose not to use outbound sales or rely on products with broad exclusions.
“ASIC will use all of its regulatory tools to address failures in this market – including through enforcement action and policy reform. We have several investigations underway,” he said.
“ASIC is also announcing today that we intend to restrict outbound sales of life and funeral insurance, in order to protect consumers.”
In some ways you have to laugh at how dumb the FSC have been. They falsely mislead parliament over adviser churn to screw over advisers for more profit and to be able to increase the sale of junk direct policies by their members.
Result. Their adviser advised business is down 30% because many advisers can’t afford to write risk business anymore and that’s about to fall of a cliff with FASEA.
Take out their members ability to outbound sell direct junk insurance, less than 2 in 5 policies actually sticking and the enormous marketing costs and they are about to start losing money on direct junk business too.
No wonder so many of the insurers are selling up!
Both ASIC (through their incorrect report 413) and the FSC (through their dodgy cartel behavior and corruptly misleading of parliament in the LIF) are both to blame for the increase in direct sales business now being condemned.
Time for the Royal Commission to look at what both ASIC and the FSC did in creating the LIF through fictitious lies against all advisers and why now many customers won’t have access to risk advice and are forced to go direct.
Direct insurance sales are a terminal cancer on the industry. In easy to understand auto-motive terms; Direct Insurance is a new car without an engine, steering wheel or seats. Its Blue Steel. Its Danny’s lemon Jag. ASIC believe so much in advisers spending hours upon hours providing advice for insurance only to let Direct Insurance run rampant. ASIC spend all their time performing micro surgery to cure head colds while this Terminal Cancer spreads throughout the ‘burbs and towns of Australia.
Ha… Haa…. HAA … No SOA , No fact Find , No advice , poor claims, high cancellation rates, but ASIC , reactive as usual ,.lets them keep going along . Cant understand the 2 rules – one for planners ie10 hours work and another on TV no work same commission !!!! How can that be ? lets level the playing field ASIC !!!