Stockbroking | Wealth Management | Corporate Advice

x

Resizing text on the web

To increase or decrease the magnification of a web page, press Ctrl and '+' (plus) to zoom in or Ctrl and '-' (minus) to zoom out. To return the page to its original size, press Ctrl + 0.

You can also scroll the mouse wheel up and down while holding Ctrl to increase/decrease zoom level.

Issues with direct sales of life insurance

PEOPLE SOLD LIFE INSURANCE THEY DON'T WANT OR CAN'T AFFORD

WHAT IS DIRECT LIFE INSURANCE?

* Life insurance sold directly to consumers, not by advisers or through superannuation

* Sold through "cold calls", online or through bank branches

* Types of direct life insurance: life or death cover; trauma cover; total and permanent disability; income protection; accidental death; consumer credit; funeral insurance

* Makes up less than 10 per cent of all life insurance in Australia, but ASIC says it has been a growing part of the market

WHAT PROBLEMS DID ASIC FIND?

* People are cancelling their policies in very high numbers or letting policies lapse:

* One in five of all policies taken out are cancelled in cooling-off period, indicating consumers may immediately realise they made a bad decision or had been pressured into buying a policy they didn't need;

* One in four that remain after cooling-off period are cancelled within 12 months;

* Three in five are cancelled within three years,

* Claims outcomes are also poor, compared to life insurance sold through other channels: 15 per cent of claims are declined; 27 per cent of claims are withdrawn

* Pressure selling and aggressive sales practices

* More than half of firms have incentive schemes which encourage sales staff to prioritise closing a sale ahead of customer's needs, including bonus payments heavily focused on value or volume of sales

* Sales of accidental death insurance particularly problematic, including consumers being "downgraded" to those policies after being rejected for comprehensive life insurance

* Only covers death due to some types of accidents;

* ASIC says it offers little value to consumers;

* For every $1 of premium paid by consumers, only 16 cents paid in claims by insurers.

WHAT IS ASIC DOING?

* Restricting outbound sales calls for life and funeral insurance

* In the meantime it expects the small number of firms who still do cold calls to move away from the practice

* Expects firms to stop selling accidental death insurance unless they demonstrate it can meet consumer needs

* Insurer Clearview is refunding $1.5 million to 16,000 people and has stopped selling life insurance directly to consumers

* ASIC is reviewing what further remediation is required by other firms

* Reforms that began in January 2018 reduce conflicted remuneration in life insurance, including for direct sales.

Source: Australian Securities and Investments Commission

Austrlaian Associated PressBack to Breaking News

Market Indices