The watchdog’s review of life insurance advice has highlighted that the industry needs to improve the quality of advice and ensure that the interests of consumers are given priority.
Following review of over 200 advice files from large, medium and small Australian financial services (AFS) licensees, the ASIC found that 63% were compliant.
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ASIC deputy chairman Peter Kell said: "This is an unacceptable level of failure, and the life insurance industry is now on notice to lift standards and professionalism. Both insurers and advice firms need to work on delivering a consistently better service for consumers.
"Life insurance is a key product through which consumers manage risk for themselves and their families. It is therefore important that both the products and the advice meet the consumer’s requirements.
"There is both a need and a demand for quality life insurance advice, and our report provides examples of advisers delivering a service that meets the needs of their clients. However, this result must be achieved on a more consistent basis."
During the review, the ASIC found that high upfront commissions are more strongly correlated with non-compliant advice, including in situations where the recommendation is to switch policies.
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By GlobalDataFurther, insurance advisors were recommending insurance cover to clients that was likely to be very difficult to afford given their financial circumstances, claims ASIC.
"Where inappropriate advice was provided we are considering enforcement action or other regulatory action ," Kell further added.
