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ASIC weighs wider clampdown on cold calling

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The Australian Securities and Investments Commission (ASIC) is seeking feedback on whether its proposed ban on unsolicited phone sales for consumer credit insurance and life insurance should apply more widely.

A consultation paper released last week asks if the prohibition should be extended to financial products such as other types of insurance and superannuation, and if so on what basis.

ASIC has released the paper before expected wider anti-hawking action by the Federal Government in response to a Hayne royal commission recommendation.

The paper hones in on consumer credit insurance and life cover as priority areas, and says the ban would provide interim protections for consumers before broader reforms.

“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 Corporations Act currently contains anti-hawking prohibitions but loopholes can leave consumers vulnerable to unsolicited sales.

The implications of wider government action on hawking are unclear, with actuarial consultant Finity warning earlier this year that careful consideration is needed to ensure there is no adverse effect on general insurance.

The Insurance Council of Australia (ICA) says it recognises the need to prevent the consumer harm from unsolicited sales highlighted by the royal commission. It will consult with members on whether ASIC’s proposed ban is the most effective way of improving consumer outcomes, spokesman Campbell Fuller told insuranceNEWS.com.au.

The proposal outlined last week would apply to unsolicited phone 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.

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.