ASIC wants to ban “cold call” sales pitches for life and consumer credit insurance ahead of planned government reforms to the sector.
The corporate watchdog says banning unsolicited telephone sales of direct life and funeral insurance as well as consumer credit insurance would prevent consumers paying for products “they do not need, want or understand”.
ASIC commissioner Sean Hughes says the proposal is consistent with recommendations from the financial services royal commission and would provide further protections from mis-selling practices now before the federal government made broader reforms.
“It is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase,” Mr Hughes said.
An ASIC review of direct life insurance sales last year found firms were engaging in sales conduct that risked consumers buying products they did not want, could not afford or did not meet their needs.
ASIC announced it would restrict unsolicited sales of direct life insurance after it found a link between outbound sales calls and sales conduct issues, including pressure selling.
Last week ASIC also found the design and sale of consumer credit insurance had consistently failed consumers.
A number of companies have already felt the watchdog’s wrath for mis-selling insurance.
In February 2018, ClearView refunded more than $1.5 million to 16,000 customers after pressuring them to buy life insurance over the phone, while Latitude Insurance provided refunds of about $1.1 million to 905 customers after it mis-sold consumer credit insurance and incorrectly denied claims on policies.
Commonwealth Bank has also refunded over $10 million for mis-sold consumer credit insurance.
The federal government has already committed to implementing a recommendation to prohibit unsolicited sales of superannuation and insurance products.
ASIC is seeking feedback on its proposal.