Just meeting legal obligations is not enough to ensure consumers are getting good outcomes, the Australian Securities and Investments Commission (ASIC) has told a panel.
Speaking at the Financial Services Council’s (FSC’s) Life Insurance conference on Thursday, ASIC’s senior executive leader for deposit takers, credit and insurers, Michael Saadat, said the watchdog was incorporating indicators of culture within life insurance problem area reviews.
“Poor culture can drive poor conduct within a firm… We are considering what the indicators of poor culture might be within a financial institution to see what the drivers of poor culture might be and understanding how those drivers operate within a firm and how they could be contributing to some of that poor conduct we are seeing in the financial services industry,” he said.
Citing ASIC’s review of CommInsure that found that the firm did not breach the law when it came to its obligations, Saadat noted that CommInsure paid a significant price for the way the conduct was exposed in the media.
“No doubt CommInsure are not alone when it comes to out of date medical definitions and policies. We continue to see examples of policies that have out of date medical definitions but clearly that conduct is out of step with community expectations and the life insurance industry has recognised that through the Code of Practice,” he said.
“We think it’s a very good step and that there is work to be done but clearly there is a role for the industry to play to close that gap that is not talked about. It is the trust consumers might not have in the products, the services that are provided, and how the industry goes about providing those services.”
Saadat said ASIC was focused on incorporating culture into its review into the sale of life insurance directed at consumers as there were indicators that suggested problem areas including potential mis-selling, issues with product design, and poor claims experiences.
Also speaking on the panel, MetLife chief executive Deanne Stewart, said while the majority of claims were quite easy to determine and moved through the process very quickly, there was a minority of claims that was deeply complex.
“No matter how much you try and write very clear rules around that at the end of the day, you can’t. And that’s where culture is so important,” she said.
She said the heart of culture was acting honestly, being transparent, and acting reasonably.
Stewart said the five elements that were necessary to contributing to good culture were philosophy, policy, process, rewards, incentives, and leadership.
