Australia’s life insurance industry needs to improve the quality of advice and ensure that consumers’ are given priority, according to a review by the Australian Securities & Investments Commission (ASIC).
ASIC’s review of more than 200 advice files from large, medium and small Australian financial services (AFS) licensees found that 63% were compliant.
However, ASIC found that 37% of the advice consumers received failed to comply with the laws relating to appropriate advice and prioritising the needs of the client.
ASIC deputy chairman Peter Kell said: "This is an unacceptable level of failure, and the life insurance industry is now on notice to lift standards and professionalism. Both insurers and advice firms need to work on delivering a consistently better service for consumers."
Kell added: "There is both a need and a demand for quality life insurance advice, and our report provides examples of advisers delivering a service that meets the needs of their clients. However, this result must be achieved on a more consistent basis."
ASIC’s report sets out the various commission models that are used to remunerate advisers in the life insurance sector. The report found that high upfront commissions are more strongly correlated with non-compliant advice, including in situations where the recommendation is to switch products.
Kell commented: "The industry as a whole needs to consider how remuneration and compliance practices can better support good quality outcomes for consumers."
ASIC regulates Australian companies, financial markets, financial service organisations and professionals who deal and advise in insurance, investments, superannuation, deposit taking and credit.