Insurers blocked as ASIC cold-calling ban starts

Insurers can no longer cold-call customers to sell life insurance and consumer credit products, with a ban coming into effect.

The ban, announced by the Australian Securities & Investments Commission last month, comes after the corporate watchdog said it was drawing ‘a clear line in the sand’ to protect consumers’.

Insurers can no longer cold-call customers to sell life insurance and consumer credit products, with a ban on the practice coming into effect on Monday.

The ban, announced by the Australian Securities & Investments Commission last month, comes after the corporate watchdog said it was drawing “a clear line in the sand” to protect consumers from pressure-sales tactics.

Banking royal commissioner Kenneth Hayne a year ago recommended that the hawking of insurance and super products be banned, in part due to the asymmetry of power and information between the seller and buyer.

ASIC implemented the ban through a modification of the Corporations Act, allowing it to move forward without having to wait for the federal government to prohibit unsolicited selling across all products and services in line with the commission’s recommendations.

Damning revelations heard at the Hayne royal commission exposed tactics used by cold callers to trap unsuspecting consumers into unsuitable or junk insurance.

Among the worst examples revealed at the hearings were life insurer Freedom Insurance repeatedly refusing to cancel a policy sold through a cold call to a man with Down syndrome who was audibly disabled, despite his father repeatedly requesting the company stop deducting money from his son’s account.

Another involved a case of a woman who was sold life and funeral insurance by Let’s Insure, a subsidiary of Select AFSL, even though she already had cover with another insurer. ASIC has since taken legal action against Select for allegedly making false and misleading representations and harassing 14 customers while selling life insurance over the phone.

CommInsure in November refunded more than $12m to about 30,000 customers who were sold life insurance over the phone between 2010 and 2014, while Commonwealth Bank in 2017 refunded more than $10m to 65,000 customers.