ASIC urges insurers to fix direct sales practices

The Australian Securities and Investments Commission (ASIC) has urged life insurers to address shortcomings in the way they sell policies directly to customers.

The call follows a review of company practices covering the period from mid-2021 to mid-2024.

Regulator highlights issues in direct sales

ASIC commissioner Alan Kirkland wrote to insurers outlining areas that require attention, including product design, sales processes, cancellation practices, and the way firms use complaints data.

He said direct sales remain a focus for the regulator because life insurance products are complex, often costly, and sold to consumers who may not seek financial advice.

“Life companies need to place the customer at the very heart of their product and service proposition, including by using customer feedback and complaints data to respond to pain points,” Kirkland said.

He noted that dispute rates in direct life sales have more than doubled since ASIC’s earlier review in 2018.

“While we acknowledge there have been improvements made by some companies in recent years, there are still notable deficiencies, evidenced by a more than doubling in dispute rates since our last review in 2018,” Kirkland said.

Areas targeted for improvement

In its communication to the industry, ASIC said insurers should:

• Use data from complaints, claims, and cancellations to refine products and improve monitoring.
• Tie sales staff remuneration to compliance and customer satisfaction outcomes rather than volume.
• Apply uniform standards to customer retention calls, avoiding pressure to keep policies in place and allowing straightforward cancellations.
• Treat complaints as business intelligence, with information shared across business units to inform changes.

Kirkland said these actions are especially important for insurers planning to expand their direct-to-consumer business.

“This is particularly important for life companies that are considering expanding direct sales of life insurance,” he said.

ASIC added it may investigate or act against conduct that suggests firms have not made sufficient changes.

Review of the Life Insurance Code announced

ASIC’s intervention coincides with a separate industry initiative.

The Council of Australian Life Insurers (CALI) has confirmed that an independent review of the Life Insurance Code of Practice will begin in October.

The code sets out binding standards for life insurers in areas not fully covered by law, such as how products are developed, how claims are processed, and how customer complaints are managed.

Peter Kell, a former deputy chair of both ASIC and the Australian Competition and Consumer Commission, will lead the review.