Businesses that sell general or life insurance, or offer credit as an ‘add-on' insurance offering, should be on guard as they come under Australian Securities and Investments Commission (ASIC) scrutiny, a law firm has warned.
Financial services law firm The Fold Legal's managing director Claire Wivell Plater said ASIC was focusing on motor, consumer credit and travel insurance — and it did not like what it saw.
ASIC invited the CEO of the UK Financial Conduct Authority, Martin Wheatley, to its 2014 Annual Forum where he gave tips on how the Authority operated in the UK.
"They follow the money and look at areas such as business model, speed of growth, comparative gross margins, customer base and culture," Wivell Plater said.
The Fold warned that insurance advisers should reassess their product design and its value for money, remuneration structures and sales practices in the field, and make sure consumers knew what they were buying.
"If a sales process includes pre-ticked boxes, bundling of costs into another product, misrepresenting the need for cover, opaque selling practices or remuneration practices that encourage aggressive sales — that is, commissions and volume bonuses — advisers could be singled out for special attention," Wivell Plater said.
Wivell Plater said placing hurdles in front of people's buying decisions would prevent mis-selling and overselling.
In a regulatory update in February, ASIC deputy chairman Peter Kell cited examples of mis-selling and highlighted the payment protection insurance scandal in the UK. While this has not been a problem in Australia, the regulator is taking preventative measures to keep it that way.
"We have seen conduct in Australia in the not-too-distant past that has concerned us — for example in the area of consumer credit insurance, which if it became widespread could make the risk of a larger mis-selling problem very real," Kell said.
