Pressure tactics and bonus schemes that prioritise new sales are causing some customers to take out life insurance policies they may not want or need, and which may not cover them as expected, the Australian corporate watchdog said in a critical review of the sector.
After listening to more than 540 recorded sales calls, ASIC said four firms failed to provide adequate information about important aspects of the cover, including key exclusions and future premium increases.
They also engaged in pressure selling techniques, including refusing to send out paperwork unless a consumer committed to buy.
Sales staff were encouraged to prioritise closing a sale ahead of the needs of the customer, including bonus payments heavily focused on value or volume of sales, the regulator said.
The practises of 11 life insurance providers selling direct-to-customers were examined and included: CommInsure, ClearView Life Assurance, NobleOak Life, Suncorp Life & Superannuation, TAL Life, and OnePath, St Andrew’s Life Insurance and its distributor Select AFSL, and Hannover Life Re.
The Australian Securities and Investments Commission unveiled plans to ban life insurance companies from directly selling their policies to consumers through outbound sales calls, after the review uncovered a wide range of poor practices in the sector.
ASIC also found that accidental death insurance only covered death as a result of certain accidents and offers little value to consumers.
Among its other findings, ASIC said consumers cancelled their policies in high numbers. One-in-five policies were cancelled in the cooling off period, while three-in-five policies did not make it to three years.
“Life insurance is a long-term product but cancellation rates and poor claim outcomes show that people are being sold products they don’t want, can’t afford, or don’t perform as they expected,” the head of ASIC, James Shipton, said.