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19-335MR ASIC to ban unfair cold call sales of direct life insurance and CCI
ASIC has today announced the implementation of a ban on unsolicited ‘cold call’ telephone sales of direct life insurance and consumer credit insurance (CCI). The ban will address poor sales practices that have led to unfair consumer outcomes. It will take effect from 13 January 2020.
The ban is consistent with recommendations made by the Financial Services Royal Commission and provides protections to consumers that complement broader legislative reform by the Government.
In announcing the ban, ASIC Commissioner Sean Hughes said, ‘ASIC will intervene to stop practices that lead to poor consumer outcomes and destroy trust in the financial system. This action draws a clear line in the sand. From January firms will no longer be able to call consumers out of the blue and use sophisticated sales tactics to pressure people into buying life insurance and CCI products.’
The ban complements enforcement action ASIC has undertaken for past poor sales conduct by insurers. Last week, CommInsure was fined $700,000 after pleading guilty to unlawful unsolicited telephone sales of life insurance. ASIC has also commenced civil penalty proceedings against Select AFSL Pty Ltd relating to telephone sales of life and accidental injury insurance.
In July 2019, ASIC consulted on the ban and sought feedback in Consultation Paper 317 Unsolicited telephone sales of direct life insurance and consumer credit insurance (CP 317). Of the 15 non-confidential responses ASIC received, no respondents opposed the ban. Also published today is Report 640 Response to submissions on CP 317 Unsolicited telephone sales of direct life insurance and consumer credit insurance. It provides ASIC’s response to the issues raised in those submissions.
ASIC has also updated our guidance in Regulatory Guide 38 The hawking provisions to reflect the ban.
- Updated Regulatory Guide 38 The hawking prohibitions
- Report 640 Response to submissions on CP 317 Unsolicited telephone sales of direct life insurance and consumer credit insurance
- Submissions on CP 317
- ASIC Corporations (Hawking—Life Risk Insurance and Consumer Credit Insurance) Instrument 2019/839
The legal instrument, ASIC Corporations (Hawking—Life Risk Insurance and Consumer Credit Insurance) Instrument 2019/839, uses ASIC’s modification power in the Corporations Act 2001 (the Act) to prohibit the offering of life insurance products and CCI products in the course of, or because of, an unsolicited telephone call, unless the person has been provided with personal advice.
The instrument is made under the modification power in section 992B(1)(c) of the Act. The instrument modifies section 992A(3) of the Act to prohibit the unsolicited telephone sales of direct life insurance and CCI products if the offerer has not provided the person with personal advice.
Prior to this ban, firms could engage in unsolicited telephone calls if certain requirements were met, for example calling the consumer during prescribed hours and giving them the option of having information from the Product Disclosure Statement read out prior to making an offer. On 19 November 2019 CommInsure pleaded guilty to 87 counts of offering to sell insurance products in the course of unsolicited telephone calls where they did not meet all of these requirements (19-313MR).
ASIC has also taken action against a number of firms where we identified misselling or inappropriate conduct in the sale of direct life insurance and CCI:
- CommInsure refunded $12 million for unfair life insurance telephone sales (19-314MR)
- ASIC commences court action against Select AFSL over phone sales of life insurance (19-244MR)
- ClearView refunded over $1.5 million to 16,000 customers after pressuring them to buy life insurance over the phone(18-029MR).
- Latitude Insurance provided refunds of approximately $1.1 million to 905 customers after it mis-sold consumer credit insurance (CCI) with Latitude personal loans and incorrectly denied claims on CCI policies sold with Latitude and other credit cards (17-457MR).
- Commonwealth Bank has also refunded over $10 million for mis-sold consumer credit insurance (17-268MR).
The ban follows ASIC’s Report 587 The sale of direct life insurance (REP 587) which found a link between outbound telephone sales, sales conduct issues and poor consumer outcomes. Similarly, ASIC’s Report 622 Consumer credit insurance: Poor value products and harmful sales practices (REP 622) found that the design and sale of CCI had consistently failed consumers, with particular concerns about unsolicited telephone sales.