Everyone’s experienced it – speaking to someone on the phone or at the bank about a finance product and the next thing you’re being inundated with recommendations for additional products, particularly insurance products likeincome protection insurance. You probably want to say no, the salesperson is pushy and persuasive and won’t let go of the discussion. Or you receive a cold call from a salesperson, pushing an insurance product. The next thing you know you’ve signed up for an expensive insurance product that you didn’t want, you probably don’t need and you haven’t had time to do due diligence on to make sure it will deliver against the promise.
In the wake of the Hayne Royal Commission into banking this type of sales tactic is now a thing of the past. Just this month the Commonwealth Bank’s CommInsure arm has been charged with 87 criminal offences alleging it provided a third party telemarketing firm with customer contact details to aggressively pursue life insurance sales to CBA clients, while failing to provide effective product disclosure information .
While these allegations were not directly considered at the Royal Commission, the practice of unsolicited “cold” calls to sell insurance products was. Adding to CommInsure’s woes are allegations that were explored at the Royal Commission, that it used outdated medical definitions to refuse insurance claims in some cases, while ignoring advice from its own experts.
Commissioner Hayne recommended that this practice of “hawking” insurance products through unsolicited cold calling should be banned.
In addition to cold-calling, the Royal Commission considered a wide range of insurance sales practices including recommending a phase out of commissions on life insurance, a review of commissions on general insurance, separating add-on insurance from a primary sale of the original insurance product and classifying claims handling as a financial service so that it could be better regulated by ASIC. It also recommended that voluntary industry codes of practice for both general and life insurance be made legally enforceable. https://www.afr.com/companies/financial-services/banking-royal-commission-insurance-commissions-in-firing-line-20190203-h1at2m
All of that is quite technical. So, what does it mean in practice for insurance customers?
Probably the first important observation is that the changes proposed by Hayne are geared at removing sales pressure around insurance products and providing consumers with the time and information they need to make informed and intelligent decisions about such an important outlay. The reality is that most people recognise that they need insurance and will seek advice about it generally, whether that’s through a financial advisor or by direct enquiry to an insurer. The reason that cold-calling works is because it puts people in an uncomfortable, awkward and pressured situation. It also means that people don’t or can’t take the time to undertake their own investigations into what they need and whether, in fact, the product being pushed on them is reputable and lives up to the service promise of the salesperson.
The second important observation is that the Hayne recommendations are geared much more strongly towards effective outcomes for insured parties, whether it be through the claims handling processes, the quality of the insurance product or the accountable directors and senior executives of insurance companies. Governance, culture, professional advice and conduct of people selling insurance will all come under a much greater degree of scrutiny. https://corrs.com.au/insights/beyond-the-banking-royal-commission-9-key-implications-of-the-hayne-report-for-corporate-australia
However, while the big end of the insurance town has come under a considerable amount of scrutiny and criticism for poor practices and behaviour, both from the Royal Commission and from the corporate regulator – ASIC – there is a significant part of the insurance industry which has and continues to operate in an ethical, responsible, customer-centric fashion.
For reputable insurers such as Aspect UW, unsolicited phone calls and hawking of poor quality and under-serviced insurance products has never been part of the business model. Rather, making available high-quality insurance products with outstanding claims performance, supported by good quality, professional and detailed advice and information to allow customers to make informed decisions about their insurance needs, underpins its service provision, all of which can be done online if you don’t want to speak to a salesperson.
There is no doubt that increased regulation stemming from the Royal Commission will change the way insurance is accessed for Australians. But for quality insurers, it will be business as usual.
