ASIC Commissioner Alan Kirkland stressed that despite the potential benefits of life insurance, the complexity and cost of the products necessitate customer-centric sales practices. He advocated using customer feedback and complaints data to address consumer concerns effectively.
The directive follows ASIC's comprehensive review of the life insurance industry's direct sales operations, examining documents and practices over a three-year period. This review aims to assess whether consumer outcomes have improved since 2018. The analysis coincides with the forthcoming Delivering Better Financial Outcomes legislation, which will permit life insurers to employ a new class of advisers qualified to advise on APRA-regulated products.
Kirkland, who previously led consumer advocacy group Choice, has a history of criticising commission-based models and flagged the Quality of Advice Review’s final report as potentially leading to future regulatory scrutiny.
ASIC's recommendations emphasise the importance of enhancing product design by incorporating comprehensive consumer feedback, including data on complaints, claims, and cancellations. The regulator also advocates for sales staff compensation to be correlated with compliance and customer satisfaction metrics. To enhance processes further, streamlined cancellation systems and proactive handling of complaints as valuable business intelligence are suggested.
ASIC has indicated it may launch investigations or take necessary actions if insurers fail to show tangible improvements. Kirkland emphasised the urgency of adopting better practices, noting that despite some advances, deficiencies persist, as evidenced by the increasing dispute rates since 2018.
As life insurance companies gear up to expand their direct sales efforts, they face a critical juncture. Strengthening product and service propositions to genuinely address customer needs will be essential, not only for compliance but also to regain consumer trust.
