ASIC finds compliance lacking in disability insurance
Financial advisers are failing in their compliance duties in selling disability insurance, according to the Australian Securities & Investment Commission (ASIC).
A disability insurance campaign undertaken by the securities watchdog examined how life companies trained their agents and how the agents then conducted themselves and how much the agents disclosed when advising on disability products.
ASIC found that in a third of agents interviewed, there were serious concerns about their failure to adequately explain products and claims handling procedures; their failure to provide adequate advice about disability products and their differences; and a lack of adequate record-keeping on client files.
"While life companies have made some changes to meet consumer protection requirements through restructuring their distribution and training arrangements, these changes are not reflected in the actual level of compliance by some agents in the Life Code," the report says.
ASIC's report found at least two companies fell short of meeting the standards of the Life Code, and has requested that for those agents which the watchdog deemed as having substandard compliance practice, the life companies employing them review their levels of compliance and report back to ASIC.
The Financial Industry Complaints Service has also reported that the proportion of complaints related to disability insurance that it has received has steadily increased since 1996.
ASIC national director of financial services regulations Ian Johnston says that it is important that consumers receive the correct advice at the outset to reduce disputes and misunderstandings.
"Given that the Life Code has been in operation for almost five years, we would now expect there to be substantial level of industry compliance," he says.
However, ASIC has come under fire from IFSA chief Lynn Ralph recently who said in a media report that ASIC's review of the disability insurance industry was based on too small a sample of 59 agents selling disability insurance products.
Ian Johnston stood by the findings in the ASIC report.
"Of course we accept that it was a limited review in terms of the numbers of agents interviewed, but these agents were from companies that represent 40 per cent of the market," he says.
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