Banks and other large financial institutions will find themselves under pressure to move to entirely open Approved Product Lists (APLs) with respect to life/risk products, following a highly critical assessment by a key Parliamentary Committee.
The report of the Corporations and Financial Services Committee inquiry into the Life Insurance industry has recommended a complete overhaul of APLs pointing to a “large body of evidence” as to their shortcomings.
It said the committee had received evidence “that the way APLs operate lacks transparency and generates conflicts of interest that lead to mis-selling, that is, selling a life insurance product on the basis of misleading advice”.
To deal with the issue, the committee recommended that the life insurance industry should “have, as a matter of urgency, a balance of affiliated and non-affiliated products on their approved product lists, and if affiliated products are recommended, the affiliation should be disclosed, and the customer should be given a comparison with non-affiliated products”.
“Beyond this, the committee further recommends that the industry transition to open approved product lists,” the report recommendations stated.
“The committee observes that the manner in which APLs have been configured may potentially breach competition laws,” the report said. “The committee therefore considers that it is appropriate that [the Australian Securities and Investments Commission] ASIC and the [Australian Competition and Consumer Commission] ACCC jointly investigate whether the past use of APLs in the life insurance industry breaches any competition laws they administer including, but not limited to, anti-competitive agreements.”
“The committee recommends that ASIC and the ACCC jointly investigate whether the past use of APLs in the life insurance industry breaches any anti-competitive laws they administer. The report of the investigation should also inform government whether the current legislation inappropriately constrains the capacity of ASIC or the ACCC to investigate anti-competitive behaviour in the financial service sector, including life insurance,” the report said.