ASIC is calling on life insurance companies to step up their product, sales, and complaints handling practices as they look to expand direct sales to customers.
In a detailed letter to industry outlining concerns and urging action following a review of direct sales practices, ASIC Commissioner Alan Kirkland listed four key recommendations to improve compliance and benefit consumers.
These included strengthening product design, improving sales practices and treating complaints as valuable business intelligence to help improve customer experiences.
'While life insurance can provide valuable benefits to consumers, it is typically a complex and costly product, so it is important that sales practices are designed with customers' needs in mind,' Commissioner Kirkland said.
'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.
'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.'
ASIC is calling on life insurance companies to:
- Strengthen product design with better use of customer feedback by testing and incorporating complaints, claims, and cancellation data into design processes, and improving product monitoring.
- Improve sales and pay practices by enhancing quality assurance processes, and by linking sales staff pay to compliance and customer satisfaction measures.
- Apply consistent quality standards to retention calls and streamlining cancellation processes, ensuring clear criteria for identifying inappropriate pressure tactics, the proper oversight of retention activities, and objection-handling practices that respect customer decisions.
- Treat complaints as valuable business intelligence, sharing complaint information across relevant business units to enable systematic improvements.
Commissioner Kirkland said it was critical for life insurance companies to improve practices outlined in the letter as they look to expand their direct sales operations.
'This is particularly important for life companies that are considering expanding direct sales of life insurance,' he said.
ASIC will commence investigations or take action in response to conduct of concern, noting the extent to which life companies can demonstrate they have taken steps to improve practices identified in the letter.
Background
In 2018, ASIC reviewed the direct sale practices of life insurance products and highlighted several areas of concern in our resulting report, The sale of direct life insurance (REP 587).
In the February 2019 final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, several recommendations were made about how life companies sold their products directly to consumers.
ASIC reviewed documents and policies from a sample of life insurers and life insurance distributors covering the period between July 2021 and June 2024 to determine whether consumer outcomes had improved since our 2018 review.
