Broader life insurance approved product lists (APLs) are unlikely to improve the quality of financial advice, the Australian Securities and Investments Commission (ASIC) says.

In a submission to the Parliamentary Joint Committee on Corporations and Financial Services’ life insurance inquiry, the regulator argues commissions are the main driver of poor advice.

But ASIC supports the recommendation for broader APLs, noting it can lead to greater competition, which is better for the consumer.

It says narrow lists create an opportunity for poor advice due to the limited number of products available. Conflicts of interest are a danger in vertically integrated dealer groups, and a static list of insurers may mean consumers miss out on innovative products.

“Overreliance on APLs may lead to poor advice if advisers do not conduct proper research on the client’s existing non-APL products before providing ‘switching advice’,” ASIC says.

“Our regulatory experience suggests advice providers operating within a vertically integrated group tend to recommend in-house products over non-related products, even where their APL includes a wide range of non-related products.”

The submission notes areas of life insurance ASIC intends to closely monitor, including a major review of life insurance sold direct to consumers without personal advice.

“In the 2016/17 financial year, we will start a new project looking specifically at insurance in super, including issues around disclosure and complaints handling, as well as conflicts of interest and culture.

“Our future work will focus on promoting consolidation of multiple accounts to avoid erosion of super benefits through insurance premiums, increasing consumer awareness of insurance cover and highlighting adequacy and appropriateness of cover.”