Unsolicited phone sales of life insurance and consumer credit insurance would be banned under a new proposal announced by ASIC.
The corporate regulator believes this proposal will prevent the sale of complex insurance products consumers neither want, need or even understand and follows recommendations from the Royal Commission.
During that inquiry it was revealed that a 26-year old man with Down syndrome took a cold call from an insurance company selling life insurance. Althought it is clear from audio recording that he did not understand what the call centre operator was asking him to agree to, Freedom Insurance still sold him a policy.
It is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase"
The 26 year-old man's father, Baptist minister Grant Stewart, said his son was contacted several times by telemarketers, including by an overseas call centre "fishing" for interest on behalf of local companies.
ASIC Commissioner Sean Hughes said the corporate regulator was determined to step in when consumer trust in "the system" was under threat.
He added ASIC understood the Government had committed to implementing the Royal Commission's recommendation to outlaw unsolicited super and insurance sales, but would do what it could to protect consumers in the meantime.
"It is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase," Hughes said.
"Such a ban is consistent with the Financial Services Royal Commission recommendations, and will provide consumers with further protections from misselling practices now, ahead of wider law reform by Government.
"Without such a ban, we are concerned that consumers will continue to be preyed upon by peddlers of inappropriate insurance products, using pressure sales tactics."
Consumer Action Law Centre chief executive Gerard Brody told the Sydney Morning Herald that cold-calling was an "outdated and abusive: practice, with a significant risk of misleading people.
"The evidence shows that these products offer very little value for customers. They pay out really low amounts of money in claims compared to the premiums made by the companies and that sort of truth isn't disclosed in a telemarketing call," he said.