ASIC are the Regulator of the financial services industry in Australia and they recently released their ‘Report 587- The Sale of Direct Life Insurance’which reviewed direct policies which included term life, accidental death, trauma, total and permanent disability (TPD) and income protection insurance. They found that:
- One in five of all policies taken out were cancelled in the cooling off period
- One in four of all the policiesthat remained in force beyond the cooling off period were cancelled within 12 months
- Three in five of all policies were cancelled in three years
In the report ASIC stated the high cancellation rate in the cooling-off period “…may indicate that consumers immediately realized they had made a bad decision or had been pressured into buying a policy they did not need”.
The regulator also found that only 58 per cent of claims under a direct life insurance policy purchase were accepted by the issuers of direct life insurance with 15 per cent of claims rejected and 27 per cent of claims withdrawn, as part of a review which lead to the creation of the report.
We would be horrified if we were delivering those kind of outcomes for our clients!
There has been recent commentary in NZ from industry specialist Russell Hutchinson of Chatswood Consulting about the differences in value between the direct life insurance products in the NZ market versus those provided with ‘Advice’ through Financial Advisers like us here at Seneca Group. This ASIC report raises many of the same concerns.
The ASIC Report Executive Summary can be found here: