ASIC has released a consultation paper seeking feedback on a proposal to ban unsolicited telephone sales of life insurance (including funeral insurance) and Consumer Credit Insurance (CCI).
This follows a report from ASIC earlier this month which identified that CCI policies represented poor value and were associated with unfair and harmful telephone sales practices.
CCI policies are generally sold alongside loans from major banks and other lenders, including credit card providers, and cover loan repayments against death, sickness, injury or involuntary unemployment.
However ASIC found that high pressure telephone sales practices meant that some consumers were sold CCI even though they were ineligible to claim and others continued to be charged premiums even though they no longer had the loan. ASIC also found that CCI had poor payout ratios with only 19 cents of every premium dollar paid in claims.
ASIC had already identified issues with direct life insurance in August 2018, including a link between outbound sales calls and sales conduct issues such as pressure selling. Funeral insurance had also been targeted by earlier ASIC reports in 2012 and 2015. The high cancellation rates for these insurance policies were thought to result from consumers not understanding the product they have signed up for.
ASIC Commissioner Sean Hughes statement
ASIC Commissioner Sean Hughes said “It is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase.”
The proposed ban follows recommendations made by the Financial Services Royal Commission to prohibit unsolicited sales of insurance products. Hughes said “Without such a ban, we are concerned that consumers will continue to be preyed upon by peddlers of inappropriate insurance products, using pressure sales tactics.”
The consultation period will be open for a period of six weeks with submissions due by 29th August 2019.
The Insurance Watch website provides online tools for consumers to calculate their insurance needs and compare quotes and benefits from a range of insurers. There is no requirement to provide personal contact details, such as a telephone number, in order to access this information. Insurance Watch believes consumers should be able to research their insurance options without any sales pressure.