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.
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.