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14-285MR ASIC sets out areas for improvement in home insurance sales practices
ASIC has today released two reports exploring consumer experiences with the sale of home building insurance.
Deputy Chairman Peter Kell said, 'Recent natural disasters have demonstrated the importance to consumers of adequate home and contents insurance. Purchasing home insurance should not be considered an afterthought, as it is vital for consumers to fully understand the type of product they are purchasing.
'ASIC's reports make it clear that the home insurance industry can implement measures that will meaningfully improve consumers' understanding of their policy, and help ensure consumers buy a product that meets their needs'.
The two reports are:
- Report 415 Review of the sale of home insurance (REP 415), and
- Report 416 Insuring your home: Consumers’ experiences buying home insurance (REP 416).
REP 415 is an ASIC review of the sales practices of 12 insurers (representing 30 home insurance brands) who sell home insurance across Australia. The report reviews and makes findings in relation to the sale of home building insurance through telephone sales (which included the review of 400 telephone sales call recordings), online sales, online calculators, advertising and promotional materials, and staff training and monitoring.
Report 416 presents findings based on qualitative and quantitative research (conducted by Susan Bell Research) of consumers who inquired about or purchased home insurance during 2013.
ASIC's review also found a number of examples of potential misconduct in relation to the advertising of home insurance products. ASIC is currently communicating with some insurers and is considering undertaking further regulatory action with other relevant insurers, in relation to these issues.
'ASIC will continue to monitor providers to ensure they are complying with their obligations to provide consumers with accurate information', Mr Kell said.
Key findings from the reports:
- Consumers often asked questions and sought assistance from insurers about how best to estimate the sum insured, however most insurers have adopted a 'no advice' or 'factual information' business model which means they are unable to provide consumers with the information and/or advice they needed.
- Most consumers 'guessed' the sum insured value, often using faulty assumptions to do so.
- For telephone sales, most consumers were not referred to available tools, such as sum insured calculators, to assist in estimating the sum insured. Consumers who paid the least attention when choosing the sum insured typically also believed that they were not at risk.
- The price of premiums dominated consumers’ reasons for inquiring and this focus limited the information they sought about policy terms. For these consumers, most insurers attempt to reduce the premium by reducing the sum insured and/or increasing the excess, potentially increasing a consumer's risk of underinsurance.
- The online channel was used for speed of purchase. The phone channel was used ‘to talk to a human’ because consumers felt the need to consult the insurer or to have their quote clarified or verified. It was at this stage that consumers seemed most in need of assistance.
- Consumers need help from insurers to make better decisions, beyond simply providing PDSs to consumers.
ASIC's MoneySmart website includes further information on home and contents insurance.
REP 415 and REP 416 further the work of two previous reports published by ASIC on home building underinsurance in 2005 and 2007: see Report 54 Getting home insurance right: ASIC’s report on home building underinsurance (REP 54) and Report 89 Making home insurance better (REP 89).