The corporate regulator says life insurance companies must improve product, sales and complaints handling processes as they look to expand direct sales to customers, and that it’s prepared to commence investigations or take action in response to conduct of concern.
While ASIC acknowledged that life companies had made improvements since the Hayne royal commission, there are still “notable deficiencies” in industry practices.
“While life insurance can provide valuable benefits to consumers, it is typically a complex and costly product, so it is important that sales practices are designed with customers’ needs in mind,” said ASIC Commissioner Alan Kirkland in a media release.
“Life companies need to place the customer at the very heart of their product and service proposition, including by using customer feedback and complaints data to respond to pain points.”
The comments follow the completion of an ASIC review into the direct sale of life insurance policies by the life insurance industry, with the regulator examining documents and policies from a sample of life insurers and distributors covering the period between July 2021 and June 2024 to determine whether consumer outcomes had improved since its 2018 review.
The completion of the review comes as the industry awaits the final pieces of Delivering Better Financial Outcomes legislation that would allow life insurers to hire the new class of adviser which is expected to be able to give advice on APRA-regulated products like life insurance.
Kirkland, formerly the CEO of consumer advocacy body Choice, has also been a fierce critic of commissions and labelled the Quality of Advice Review final report – which set the framework for the DBFO reforms – a “recipe for another royal commission”.
ASIC wants the industry to strengthen product design with better use of customer feedback by testing and incorporating complaints, claims and cancellation data into design processes and improving product monitoring.
It also wants sales staff pay to be linked to compliance and customer satisfaction measures and for the industry to streamline cancellation processes and treat complaints as “valuable business intelligence”.
ASIC said it would “take action in response to conduct of concern, noting the extent to which life companies can demonstrate they have taken steps to improve practices identified” in the review and an accompanying letter.
Kirkland said it was “critical” for life insurance companies to improve practices outlined in the letter as they look to expand their direct sales operations.
“While we acknowledge there have been improvements made by some companies in recent years, there are still notable deficiencies, evidenced by a more than doubling in dispute rates since our last review in 2018,” Kirkland said.
