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Firms that sell life insurance have been put on notice after an ASIC review found high levels of non-compliance.
The review found that 63 per cent of AFS licensees were compliant, while 37 per cent “failed to comply with the laws relating to appropriate advice and prioritising the needs of the client”.
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ASIC also found that “high upfront commissions are more strongly correlated with non-compliant advice, including in situations where the recommendation is to switch products”.
The review was based on an examination of more than 200 advice files from AFS licensees of all sizes.
Deputy chairman Peter Kell said the review had uncovered an “unacceptable level of failure”.
“Both insurers and advice firms need to work on delivering a consistently better service for consumers,” Mr Kell said.
“The industry as a whole needs to consider how remuneration and compliance practices can better support good quality outcomes for consumers.”
Mr Kell said ASIC had started investigating some firms based on what had been discovered during the review.
“Where inappropriate advice was provided we are considering enforcement action or other regulatory action,” he said.
Meanwhile, Mortgage Choice has said that the ASIC report validates its flat commission model.
“By taking a paid-the-same approach to our insurance products, we ensure our customers receive the right product for their needs,” Mortgage Choice said.
“In ASIC’s report, the industry body implored all adviser groups to introduce a remuneration structure that supports good quality advice that prioritises the needs of the client, and we believe our paid-the-same initiative does just that.”
[Related: ASIC suspends firm’s licence for compliance breaches]
