The Australian Securities and Investments Commission (ASIC) is on the war path, having now turned their attention onto the life insurance industry.
The corporate watchdog recently fined some of Australia’s biggest banking players, NAB and Westpac, for misleading customers and are now drilling down on life insurance advisors, whose hefty commissions to sign customers up to their policies have drawn unwanted attention.
In order to do so they are carrying out forensic investigations into the entire life insurance industry – which is worth billions – after initial findings turned their attention to insurance advisors not complying with ASIC’s financial service laws – which are put in place to protect consumers.
Since the Commonwealth Bank financial planning scandal, ASIC has received much criticism from the Australian government about its handling of the situation and has been accused on not acting fast enough or being tough enough.
The government has since been plying pressure on the finance watchdogs to investigate the life insurance remuneration model – to make sure consumers best interest is the number one incentive for advisors, not a tempting commission structure.
Currently, life insurance is exempt from the Future of Financial Advice (FOFA) ban on commission reforms, so insurance companies and advisors are able to make a wage, as well as a commission from policies sold.
Last month ASIC deputy chairman Peter Kell revealed, "It is still the case that when we find poor advice in a licensee, more often than not poor advice around life insurance is a key part of the problem."
ASIC is expected to release a full report on its investigation at the end of September.
In the interim, for those looking for a great life insurance policy make sure you do a thorough comparison, speak to a couple of advisors and shop around for a life insurance policy that is going to suit your individual requirements.