Two consumer law firms have wholeheartedly backed plans by the corporate regulator to ban unsolicited telephone sales of direct life insurance and consumer credit insurance (CCI).

The Australian Securities and Investments Commission (ASIC) intends to ban unsolicited telephone sales of direct life insurance and consumer credit insurance (CCI) using its modification power in the Corporations Act. This will provide interim protections to consumers ahead of broader law reform by the Australian Government, it says.

In a joint submission that strongly supports the proposal, the Financial Rights Legal Centre – a community legal centre that helps low income and otherwise marginalised or vulnerable consumers – and Melbourne-based not-for-profit consumer organisation Consumer Action Law Centre applaud the plan to prohibit unsolicited telephone contact to offer, issue or sell direct life insurance, including funeral insurance.

“Unsolicited selling is an outdated and abusive practice with a significant risk of mis-selling people products they don’t want, need or understand,” the consumer law group submission says. “We strongly support ASIC’s proposed use of its modification powers and support ASIC making the best use of its full regulatory toolbox in order to protect consumers from harmful sales practices.”

“We welcome the interim protection for consumers from particularly egregious sales practices in relation to particularly poor value products. Modifying the anti-hawking provisions is the best way for ASIC to provide this protection using currently available powers while consumers await legislative change. “

Cold calling is a particularly harsh practice when it involves vulnerable people who may not understand the products or feel able to say no to the seller, says the submission.

“Insurance products sold via cold-calling, particularly accidental death and accidental injury insurance, are not valuable products. This is evidenced by their very low claims rates and ratios,” it says. “We strongly recommend an economy-wide ban on unsolicited selling.”

While anti-hawking laws do place strict restrictions around the sales of insurance with cold calls, insurers get around these laws via loopholes, it says.

“They can obtain a customer’s consent in some form such as an innocuous ticked box on an unrelated sales document or by making two calls where one is to obtain the consent and the follow up call to make sales. Unsolicited sales in insurance should be banned entirely and all loopholes closed.”

The proposed ban removes the scope for insurers and their agents to lawfully make unsolicited telephone sales of life insurance and CCI by complying with technical and largely procedural requirements, such as calls between certain hours and the provision of written disclosure.

“The closure of this loophole … is welcome,” the submission says.

Submissions were due on Wednesday.