Regulator restricts cold calling in Australia

The Australian Securities and Investments Commission (ASIC) has restricted firms that still resort to cold calling to pressure people to purchase life and funeral insurance.

Its review of direct life insurance, which is sold directly to people rather than by advisers or through superannuation, found consumers are cancelling their policies in very high numbers.

“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 told The Australian.

ASIC listened to more than 540 recorded sales calls, finding all 11 firms failed to provide adequate information about the insurance cover including key exclusions and future premium increases.

ASIC’s review found one-in-five policies were cancelled in the cooling-off period, with another one-in-four withdrawn within a year. Three-in-five policies were cancelled within three years. When policyholders tried to make a claim, 15 percent were rejected and another 27 percent were withdrawn.

Industry body the Financial Services Council noted the ASIC report found its life insurance code of conduct, which explicitly bans pressure selling, had improved outcomes for consumers.