ASIC's review of direct life insurance companies has found there to be high cancellation rates and poor claims outcomes. Sales practices and product design, ASIC says, are leading to worse consumer outcomes.
Key findings include:
- One-fifth of all policies taken out were cancelled during the cooling-off period
- A quarter of all policies that remained in-force after the cooling-off period were cancelled within a year
- Three-fifths of all policies were cancelled within three years
- Fifteen per cent of direct policy insurance claims are declined, with 27 per cent of claims withdrawn
- Consumers don't understand the products properly
- After listening to recorded sales calls, all firms failed to provide adequate information about important elements of the cover, including key exclusions and premium increases set for the future
- Pressure-selling techniques were used in four of the companies, including refusing to send paperwork without a customer committing to buy the insurance policy
- Accidental death insurance 'downgrades' were particularly problematic, after a customer didn't qualify for comprehensive life insurance
The review looked at 11 companies selling direct insurance either via intermediaries or directly, including CommInsure, ClearView Life Assurance, NobleOak Life, Suncorp Life & Superannuation, TAL Life, and OnePath Life, St Andrew's Life Insurance and distributor Select AFSL, Hannover Life Re and distributors Greenstone Financial Services and Auto & General Services.