While there was is no place for the “hawking” of Life Insurance products from unwanted high-pressure sales, direct selling still has a key role in the industry if it is done ethically.
This was one of the points of agreement from a panel discussion on direct selling at the FSC Life Insurance Conference, where participants heard the views of regulators, providers and industry representatives.
The Hayne Royal Commission shone the spotlight on rare cases of unscrupulous selling practices and has made a number of recommendations for reform, but ASIC’s Senior Executive Leader – Insurers, Emma Curtis, reminded the conference that the regulator has already been moving to address this issue.
Curtis said that ASIC had completed research from listening to 500 phone direct selling phone calls provided by insurance providers, and it was clear that there was a link between direct selling and “poor consumer outcomes” in terms of declined claims and lapse rates.
She said the calls had revealed some “quite deliberate” selling behaviours, such as overriding people who wanted to cancel their insurance and aggressively trying to persuade them to change their minds.
“There were a range of techniques we observed which used egregious sales tactics,” Curtis said.
She said that remuneration arrangements often motivated poor behavior, while there also seemed to be a “disconnect” between provider training materials and what was happening in practice. All of this pointed to the need to improve quality assurance.
Curtis said that 50 percent of policies which were directly sold lapse within five years, a situation which was “not good reputationally for the industry.”
She said that in the aftermath of the Royal Commission, which had also been critical of ASIC’s willingness to litigate, that the industry was “on notice” on the issue of direct selling.
Nick Kirwan, the FSC’s Senior Policy Manager on Life Insurance, agreed that it was “detrimental” when people were pressured into making decisions they hadn’t had time to fully consider, but said it was important that the industry did not “throw the baby out with the bathwater” and abolish direct selling entirely.
“If people want to receive an outbound call and they have consented to there is nothing wrong with that per se,” said Kirwan.
“There is a difference between that and when the customer answers the phone and says ‘what is this about then.’”
He said that with pressure on the group insurance market and advised channels, customers needed to be able to choose their preferred channel.
Instead of “strangling” direct insurance because of inappropriate practices, said Kirwan, a better approach was to make sure those practices did not exist.
This could be dealt with not only through regulation, but also when the FSC finalises version 2.0 of its Life Insurance Code of Practice.
The Royal Commission, he said, had uncovered two drivers of poor behaviour: culture and conflicted remuneration.
“If we can get culture and remuneration right, that would go a long way to resolving the issues from the Royal Commission,” said Kirwan.
Brenard Grobler, the Chief Executive of provider Greenstone Financial, said the direct “hawking” of life insurance was a “no brainer” for the industry, and there was never a place for cold calling customers without giving them time to consider and compare products.
Customers should always be the ones “in control” in any direct selling situation, he said.
The panel went on to discuss the issue of product disclosure relating to exclusions and pre-existing conditions – areas which frequently confused customers and were the root cause of many disputes.
The FSC’s Nick Kirwan said that the industry should, in some cases, go back to the “drawing board” and design products, the features of which could be adequately described on one page.
“When we have a 150-page product disclosure statement it is beyond any consumers’ attention span to comprehend,” said Kirwan.
ASIC’s Emma Curtis warned against putting “too much weight” on disclosure.
“It can’t cure all the problems of sales practice and product design,” she said.