Consumers tend to pick up the phone to ask about home building insurance to “talk to a human because they want to consult, clarify or verify,” research for the Australian Securities and Investments Commission (ASIC) says.

But that simple desire for advice with a personal touch sparks insurers’ regulatory jitters. Call centre staff are not licensed to offer personal advice.

The result is all too often a scripted response that in some cases may as well be delivered by robots.

Call centre staff working within a narrow remit can find themselves making comments that aren’t in anyone’s interests if they move too far off the script.

“No advice or factual information models appear at odds with our finding that many consumers want or need some form of assistance or advice when enquiring about or purchasing home insurance,” ASIC says.

It’s a dilemma that is recognised by the insurers. But they fear landing in a regulatory morass if guidance given to potential customers slips into the realm of personal advice that call centre staff are not allowed to give.

ASIC highlights some generic best-practice examples for helping consumers in its review, but the line between general and personal advice is so unclear that cautious insurers would prefer to take a minimal approach rather than test any boundaries.

“Overall, insurers and their staff are serving the needs of their customers by providing information within the constraints of the current regulatory framework,” Insurance Council of Australia (ICA) Acting CEO Karl Sullivan says.

“However, the experience of ICA members is that this framework unnecessarily restricts the ability of licensees to provide simple product advice.”

ICA has taken up the issue with the Financial System Inquiry, which is due to hand its report to Treasurer Joe Hockey later this month.

Before the current financial services regulatory regime, simple insurance products could be offered with some basic advice around product information and needs, ICA says in its submission to the FSI.

But the legal requirements now attached to the provision of personal or general advice have resulted in limited or no advice at all.

“The insurance industry would welcome improved clarity around the boundary between personal and general advice to enable insurers to share relevant information with their customers,” ICA spokesman Campbell Fuller told insuranceNEWS.com.au.

Home policies are not risk-free purchases, particularly given a lack of consumer knowledge about different types of cover and the personal and financial cost of underinsurance.

Survey data from Susan Bell Research, commissioned as part of the ASIC review, shows 41% of consumer quote enquiries were conducted by phone, while 23% used a combination of phone and online as they sought more assistance than is offered via the internet.

While some consumers had useful phone conversations, they could still be left floundering on issues such as adequate sum insured amounts, and the research found few examples where consumers were referred to online calculators.

Most sales staff responded to concerns about premium levels by offering to reduce the sum insured or increasing the excess, also raising the risk of underinsurance.

In one telephone transcript featured in the ASIC research, the salesperson advises against using online calculators saying, “a lot of the time they do over-calculate”.

Under the no-frills approach direct retail buyers are often simply referred to the insurer’s detailed product disclosure statement (PDS) for answers.

The PDS aims to provide information in clear, plain English, but the research says the documents are not enough to meet information needs, are often not read or are skimmed through by buyers and can be received late in the process.

“The conclusion that we draw from this research is that consumers need some form of assistance to help them make better decisions beyond simply providing PDSs,” the Susan Bell Research report says.

ASIC says rebuilding costs and the implications for insurance seems to be one area where insurers have information they could share with consumers, perhaps as general guidelines rather than personal advice.

“Consumers may also benefit from information about the likely risks they face and suggestions that they should consider the longer-term consequences of suffering a shortfall when a building is destroyed,” it says.

The law as it stands finds consumers, regulators and insurers caught between a rock and a hard place.

While ASIC finds clearer general and personal advice is needed to prevent home underinsurance and improve the sales process for all parties, the solution to the impasse rests not with the insurers but with the regulator and the lawmakers.