Consumer advocates are calling on the Federal Treasurer and ASIC to implement the ban on unsolicited selling of insurance and superannuation consistently with the letter and spirit of Commissioner Hayne’s recommendation in the Final Report of the Banking Royal Commission.
Consumer Action Law Centre, Financial Rights Legal Centre, Financial Counselling Australia and Super Consumers Australia have made their case in a submission to the Australian Securities and Investment Commission (ASIC) Consultation Paper 364: The Hawking Prohibition and a draft update to Regulatory Guide 38 (July 2021) (RG38).
“Unsolicited selling is an outdated and abusive practice with a significant risk of mis-selling people insurance they don’t want, need or understand,” said Gerard Brody, CEO Consumer Action.
“These pressure-selling tactics do not deliver benefits to consumers—the policies are often more expensive due to sales commissions, or fail to provide appropriate insurance coverage,” he said.
Of most concern to advocates in the draft update to Regulatory Guide 38 (RG38) is the entirely unwarranted exemption given to add-on travel insurance from the hawking ban.
This follows Federal Treasurer Josh Frydenberg MP announcing travel insurance and a raft of other insurance products will receive exemptions from the “industry-wide” deferred sales model—a 4-day pause in the sales process that was designed to prevent pressure-selling of insurance across the entire industry.
“Despite thousands of Australians complaining about their travel insurer during Covid-19, the Federal Treasurer is giving travel insurance special treatment: an unwarranted exemption from Commissioner Hayne’s sensible reforms that would stop pressure sales of junk insurance,” he said.
“Now ASIC is signalling that travel insurance will also get an exemption from the hawking ban,” said Mr Brody.
The consumer groups pointed to industry research that found that the risk of under-insurance in travel can be caused by the purchase of products with exclusions, a problem associated with insurance sold unsolicited.[i]
“Unless ASIC amends its draft guidance, it will give the green light to travel insurers and their retailing partners to continue ‘business as usual’ with all of the attendant harm that entails.”
Mr Brody said that failure to amend would also signal a return to the dark days of financial firms successfully lobbying for undeserved and harmful loopholes and exemptions from the law—a problem Commissioner Hayne explicitly called out in the Final Report.
“The previous anti-hawking regime failed to stop the pressure sales of inappropriate products. This reform must stamp out unsolicited selling practices altogether—not allow it to continue simply because travel agents want huge commissions from the pressure sale of add-on insurances,” he said.