ASIC to crack down on life insurance cold calls
The regulator hopes the restriction will give customers a better experience.
The Australian Securities and Investments Commission (ASIC) is looking at ways to restrain sales calls related to life and funeral insurance because consumers are being sold plans that aren't useful to them.
It has made this decision after reviewing cancellation rates and claims outcomes, conducting consumer research and listening in on 540 recorded sales calls from 11 insurance firms.
"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," ASIC chair James Shipton said in a statement.
The most striking findings came from the recorded sales calls. All 11 firms that ASIC monitored failed to provide customers with enough information about the policies they were selling. More than half of the firms had internal incentives in place that prioritised closing the sale over customer satisfaction. A handful of the firms were even engaged in "pressure selling" techniques like refusing to send customers their paperwork until after they had agreed to purchase the policy.
How to avoid junk policies as a customer
Customers should pay close attention to the terms of any insurance product they buy, but this is especially important for life insurance where the commitment is long-term and issues like pre-existing medical conditions come into play.
Luckily there are steps consumers can take to make sure they are getting life insurance policies that reliably meet their needs.
When buying directly from an insurer
When buying life insurance directly from a provider, as was the case with these cold calls, customers can choose policies that are structured in one of two ways. They can be:
- "Off-the-shelf" policies that do not take customers' individual lifestyle factors or medical histories into consideration or;
- Custom policies that require customers to undergo a medical evaluation and for the insurer to underwrite the policy specific for that customer.
Customers who are overwhelmed by the fine print and who don't want any surprises at claim time should go for option two: a custom policy that is specifically underwritten for them. Policies that aren't underwritten specifically for the customer can often cost more and contain fine print that leads to denied claims later.
Customers can also use an insurance adviser who will help them get quotes on several custom policies and help them understand the fine print.