ASIC slams banks for life insurance ‘conflict of interest’
The Australian Securities and Investments Commission (ASIC) has criticised banks with in-house financial advisors for favouring their own life insurance products to the detriment of consumers.
In a submission to a parliamentary inquiry into the life insurance industry, ASIC stated that while policies are sold through financial advisors rather than the banks themselves, “remuneration arrangements can affect the quality of advice received by clients.”
"Our regulatory experience suggests that advice providers operating within a vertically integrated group tend to recommend in-house products over non-related products,” it said.
According to the regulator, over 80% of the life insurance industry has commission-based arrangements with advisors, which is more likely to result in poor financial advice for customers.
The submission from ASIC provided further criticism of the role of financial advisers within the wealth divisions of banks, with the sector coming under fire recently for its profit-driven culture built on commission rather than the best interests of clients.
Financial advisors can currently offer advice based on an approved list of financial products under the license of a particular bank, but an industry-sponsored report in 2015 recommended these lists expand to offer a larger range of products.
However, in response to the 2015 report, ASIC stated that, “this will not on its own improve the quality of financial advice and competition in the life insurance industry.”
The regulator instead encouraged the government to bolster its own powers, which would allow ASIC to fine insurers found responsible of unfair practices.
Looking for a life insurance policy but don’t want to go through a financial adviser? Consider comparing policies yourself online! That way you'll be able to ensure that you are not only paying a low premium, but you’re also getting the level of cover you need.