ASIC advocates linking life sales pay to compliance
The Australian Securities and Investments Commission (ASIC) has urged life insurance companies to pick up their act on direct sales to customers including linking sales staff pay to compliance and customer satisfaction measures.
The regulator said it had written a detailed letter to industry outlining concerns and urging action following a review of direct sales practices.
ASIC commissioner Alan Kirkland said that while it acknowledged there had been improvements made by some companies in recent years there were still notable deficiencies, evidenced by a more than doubling in dispute rates since ASIC’s last review in 2018.
Kirkland said the ASIC letter to life insurers had listed four key recommendations to improve compliance and benefit consumers.
ASIC is calling on life insurance companies to:
- Strengthen product design with better use of customer feedback by testing and incorporating complaints, claims, and cancellation data into design processes, and improving product monitoring.
- Improve sales and pay practices by enhancing quality assurance processes, and by linking sales staff pay to compliance and customer satisfaction measures.
- Apply consistent quality standards to retention calls and streamlining cancellation processes, ensuring clear criteria for identifying inappropriate pressure tactics, the proper oversight of retention activities, and objection-handling practices that respect customer decisions.
- Treat complaints as valuable business intelligence, sharing complaint information across relevant business units to enable systematic improvements.
Kirkland said it was critical for life insurance companies to improve practices outlined in the letter as they look to expand their direct sales operations.
“This is particularly important for life companies that are considering expanding direct sales of life insurance,” he said.
Kirkland’s letter said that while ASIC acknowledged the improvements made by some life companies in recent years, “there remain notable deficiencies in industry practices in relation to direct sales.
The letter listed the improvements since 2018 as being:
- Lapse rates for directly sold policies have fallen: death cover lapse rates have dropped from 14.1% to 12.1%, with similar drops across almost all cover types.
- Fewer customers who bought policies directly are withdrawing their claims.
- Some companies now link sales agents’ pay to compliance and customer satisfaction, not just sales numbers.
- Several life companies now quality assure all sales calls, instead of a small sample, by using technology such as AI-powered speech analytics.
It listed the remaining challenges as being:
- Claims disputes for directly sold policies have significantly increased across all channels, with dispute rates more than doubling since 2018.
- There have also been concerning increases in rates of disputes involving policies sold through a financial adviser.
Good old ASIC can’t help themselves, the whole article is about Dodgy Direct Life Ins but ASIC in the last comment must somehow make it about demonising Advisers. ASIC you are pathetic.
Overreach. It is NOT the regulators role to designate how to run private enterprise particularly when asleep at the wheel or flat out ignored Shield and Venture Egg for over 2 years. It’s really disgusting and unique to Australia.
ASIC should not be responsible for Financial Services just another example of ignoring core responsibility at significant cost to Auatralians and participants then spending resources outside their remit. Pathetic
@Overreach Again,
I wouldn’t be too worried about ASIC or any other regulatory body that thinks they can change a Life insurance industry that they effectively killed off a few years ago by dumb LIF legislation.
Insurance companies and advisers had two fundamental options in the promotion of “Risk” insurance to accommodate clients.
The first was policy conditions and what options that could be sold to a client to suit their needs.
The second was cost, and in many cases, what represented value for money, “just in case” or “what if”.
Those two basic options have been removed since there are fewer life insurance companies now removing the need to compete and they all offer the same (“me too”) inferior risk products, with no guarantee that client’s premiums won’t increase between 30%-50.0% within 18 months of taking out a policy.
That more than likely accounts for lower claims because less and less policies are being sold by advisers and those who appear healthy can no longer justify paying the cost of retaining their policy/policies.
Another day, another laced swipe at advisers.
I’d encourage advisers to read the submissions of Commissioner Kirkland in his tenures before he became an ASIC Commissioner.