FSC supports ASIC’s life insurance sales review

The Financial Services Council (FSC) has commended the Australian Securities and Investments Commission’s (ASIC’s) review on the sale of direct life insurance, with the report finding that the FSC Life Insurance Code of Practice had lifted the bar in direct insurance.

In the report, ASIC analysed consumer sales calls both before and after the Code of Practice was introduced, finding that it had improved conduct.

“For many firms, conduct had improved, and the introduction of the Code by the FSC appears to have played a role in improving sales standards, particularly where it sets clear and specific expectations,” the report said.

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The FSC was disappointed, however, that the report uncovered some continuing practices among some life insurers and distributors that meant “too many” consumers were buying products that they later cancelled or without properly understanding the cover they had taken out.

A second iteration of the Code that the FSC was currently working on with ASIC, consumer groups and other industry stakeholders aimed to further enhance the Code’s consumer protections.

In the meantime, the report highlighted the following benefits of the code to assist consumers:

  • Pressure selling was explicitly banned by the FSC Life Insurance Code of Practice;
  • Life insurance companies were required to provide sales staff with a set of rules and adequate training to prevent unacceptable sales practices; and
  • The Code also required life insurers to ensure consumers are given all the information they need to make an informed choice about the insurance they buy.

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During the negotiations in relation to the LIF, the FSC went directly to Kelly O'Dwyer at the last minute to attempt to lobby her to carve out direct insurance from the LIF process.
During the LIF negotiations the FSC did everything in their power to discredit the level of commission received by advisers in respect to Life Insurance advice and adamantly pursued a flat level commission model, designed for one purpose only and that was to maximise the profitability of their insurance company membership.
The FSC openly supported the results of the flawed ASIC Report 413 and the subsequently misguided Trowbridge Report, both designed to attack and discredit the then commission based remuneration model for risk insurance effectively providing impetus to the direct insurance model.

You couldn't write better comedy than this! The corrupt practices of both ASIC and the FSC which created the LIF and the cartel FSC members all gouging existing customers with price increase forces more customers to go direct.
ASIC are now condemning direct sales practices for inferior products and poor selling practices and the FSC's response is the Life insurance code of practice which has little benefit to customers and no enforcible powers for breaches and is therefore breached every day.
Lets hope the royal commission start getting some answers out of this corrupt cartel FSC mob when they take the stand.
The questions that need answering by the FSC:
1. Why did the FSC wait until after the LIF was passed before providing ASIC with correct lapse data which proved (as admitted by ASIC) that churn was in fact not an issue with advised sales?
2. Why did the FSC members all start raising premiums on exiting customers business while reducing new business premiums thereby actively encouraging a churn issue that was not there in the first place? There is obvious cartel behavior by FSC members.
3. What fines have been imposed by the FSC on its members for breaches of the Life insurance code of conduct e.g. Comminsure and the direct sales members ASIC have admitted to bad sales practices, lower claims payments and appalling lapses?
Come on Royal Commission lets get some answers from the FSC.

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