FSC ethics code has ‘improved’ direct insurance sales

ASIC’s review of the direct life insurance industry found three in every five direct life insurance policies sold were cancelled within three years, with one in five cancelled before the end of the cooling off period and one in four of the remaining policies cancelled within the first 12 months.

ASIC chair James Shipton said these high cancellation rates, alongside poor claims outcomes, suggested direct insurance products either don’t perform as expected or are being sold to people who don’t want or can’t afford them, often through inappropriate sales techniques.

However, the FSC noted in a statement that ASIC’s review found the improved conduct of a number of firms appears to have been influenced by the FSC’s code of practice.

“For many firms, conduct had improved, and the introduction of the code by the FSC appears to have played a role in improving sales standards, particularly where it sets clear and specific expectations,” the report said.

Despite this, the FSC said it was “disappointed the report has uncovered continuing practices” among some firms that have led to poor client outcomes.

“The second iteration of the Life Insurance Code of Practice is well underway and the FSC is working with ASIC, consumer groups and other industry stakeholders to further enhance consumer protections in the code,” the FSC added.

“Direct life insurance is an accessible and simple means of getting life insurance cover for many people. However, for consumers with a complex medical history or with other questions or concerns about appropriate cover, they should contact a financial adviser.”