Major Australian retailers discovered at least two decades ago that direct marketing works. An acceptable proportion of consumers do read the junk mail that turns up in their letterboxes and, as a result, some of them actually do buy the 90-centimeter plasma television.
Notwithstanding the imposition of tough new rules with respect to nuisance calls, direct sales via so-called telemarketing centres also appear to have a value. Thus, it has not been unusual for people to be called away from their dinner tables to be told of attractive holiday offers and, occasionally, of the benefits of particular forms of insurance.
Where financial services products are concerned, insurance has tended to be the tip of the iceberg where telemarketing is concerned, and the financial services industry would do well to note that the regulator, the Australian Securities and Investments Commission (ASIC), has made clear that it is not entirely comfortable with the practice.
In last week’s Money Management we also noted that a number of financial services companies were surfing off the back of an Australia Post online survey to gather business leads. Survey respondents were asked some reasonably generic questions about their financial services needs, with the results then being fed back to companies prepared to pay a fee (presumably substantial) to access the resulting data.
The consequence was that a survey respondent who acknowledged that they had already purchased an insurance product and might, therefore, purchase more of such products, received an offer from a major insurer.
There is absolutely nothing illegal about such practices. Many also claim such practices are not unethical. But there is still the broader question of whether the use of such marketing devices is appropriate with respect to financial services products covered by the Financial Services Reform Act.
Notwithstanding all the words and disclaimers usually utilised by the purveyors of these marketing devices, can anyone credibly suggest that those filling in the surveys are doing so to gain information about financial products? Realistically, those filling in the surveys are doing so in the hope of winning some sort of prize and are totally bemused when the only correspondence they receive in return relates to the offer of an insurance policy.
Australians by and large are certainly underinsured, but will the insurance gap be appropriately closed by companies pursuing devices such as generic surveys? How, without appropriate advice or research, can consumers be sure that the products on offer are appropriate to their needs?
There may be nothing illegal about the direct marketing tactics being employed by some financial services companies, but when the regulator starts dealing with the consequent complaints, they will find few places to hide.
— Mike Taylor
