ASIC still finding issues with life insurance advice

Speaking to the Parliamentary Joint Committee on Corporations and Financial Services earlier this month, ASIC deputy chairman Peter Kell said that the issues uncovered in its 2014 life insurance advice review continue to exist today.

“On life insurance and advice remuneration, we’ve seen recent significant law reform through the parliament on this issue, and those reforms start to take effect from 2018,” Mr Kell said. "This will affect how insurers pay for the distribution of life insurance, both by financial advice and through the direct channel, with an aim of reducing some of the conflicts of interest and problematic practices.

“We have several projects on foot in relation to the advised channel for life insurance. Our 2014 review found that there were significant problems in this area.

“Unfortunately, in our surveillances, we are still regularly seeing poor-quality life insurance advice and inappropriate advice to switch life insurance.”

Mr Kell said that ASIC is currently reviewing life insurance advice in the lead up to the reduction of allowable commissions. It is focusing, he said, on advisers who have large numbers of policy lapses among their clients.

“This review has identified that there are potentially significant numbers of advisers who may be providing life insurance advice to clients [that] is not in their best interests," the deputy chairman said. "Similarly, in our other current surveillance work, where we look more broadly at advice, we are still seeing high levels of poor life insurance at times.”

ASIC is still considering whether to take action against some of the advisers and their licensees identified in these reviews, Mr Kell added.

“We’re still to make a decision. That is a project that is partway through,” he said.

“But I want to be clear on this point: The fact that that is our initial focus doesn’t mean that there are no problems elsewhere, that every other adviser identified through this exercise is problem-free or that there aren’t ongoing problems.

“We want to work with the industry to crack down on the advisers who are not doing the right thing by their clients. I would argue that this makes our work in this area critical, and that compliance with remuneration reforms as they come into play is going to be a key priority.”