The Australian Securities and Investments Commission (ASIC) is set to ban unsolicited telephone sales of consumer credit insurance and life cover ahead of wider anti-hawking reforms.

A consultation paper released today on the proposed ban says ASIC will provide interim protections to consumers as the Government prepares to take a tougher overall stance on financial product hawking.

“Without such a ban, we are concerned that consumers will continue to be preyed upon by peddlers of inappropriate insurance products, using pressure sales tactics,” Commissioner Sean Hughes said.

“It is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase.”

The Hayne royal commission recommended a ban on hawking of superannuation and insurance products, noting that current Corporations Act prohibitions have loopholes that can still leave consumers vulnerable to unsolicited sales.

ASIC says consumer credit insurance and life cover are complex products that require careful consideration and poor decisions can lead to significant financial harm.

“The disclosure requirements for unsolicited telephone contact do not by themselves ensure that the consumer has had the opportunity to reflect on their personal circumstances, consider alternative products and make an informed decision,” the consultation paper says.

Implications of wider Federal Government action on hawking are still unclear, with actuarial consultant Finity warning earlier this year that careful consideration is needed to ensure there’s not an adverse effect on general insurance.

The proposed ASIC ban outlined today would apply to unsolicited telephone sales on life and consumer credit insurance when general or no advice is given, and would include sales by financial advisers, and encompass funeral cover.

Consumer Action Law Centre CEO Gerard Brody says consumer credit insurance and direct life insurance have become “exploitative cash cows”.

“A ban on cold-calling of insurance was a much-needed recommendation of the royal commission and we welcome the swift action by ASIC,” he said.

Unsolicited selling can occur when contact details are obtained through surveys and competitions, clicking on sponsored content, telemarketing, or an existing relationship with a lender or insurer.

The Financial Rights Legal Centre also says a ban is needed “sooner rather than later” to prevent exploitation using “dodgy tactics”.

“Unsolicited direct life insurers and their associated partners are the ‘used car salesmen’ of the insurance industry,” Financial Rights Legal Centre Director of Casework Alexandra Kelly said.

“Thousands of Australians have ended up with low-value life insurance products and CCI that they don’t want or need and can’t afford.”

Comments on the ASIC paper are due by August 29, with ASIC planning to consult further on draft proposals in December and finalise changes in March.

The paper is available here.