Consumers risk buying inadequate home building insurance due to a lack of assistance from insurers, according to the Australian Securities and Investments Commission (ASIC).

Many consumers guess the sum-insured value of homes and are confused about the concept, while telephone sales staff often fail to direct them to calculators that help estimate rebuild costs, two reports from the regulator find.

“Most insurers have adopted a  ‘no advice’ or ‘factual information’ business model, which means they are unable to provide consumers with the information and/or advice they needed,” ASIC says. “Feedback from insurers is that they do this to minimise the risk that any advice provided will trigger regulatory requirements associated with personal advice.”

Insurance Council of Australia Acting CEO Karl Sullivan says the uncertain Corporations Act boundary between personal and general advice discourages more tailored information, and the regulatory framework restricts licensees.

“The time has come for these unnecessary restrictions on general insurers to be loosened, to enable the easier transfer of information between the industry and consumers,” he said.

ASIC examined home building insurance sales through phone and online channels, plus use of online calculators, advertising materials and staff training and monitoring.

At the same time, Susan Bell Research held a study commissioned by ASIC that included interviews with consumers, comments from an online discussion group and a survey of 1058 policyholders.

“ASIC’s reports make it clear that the home insurance industry can implement measures that will meaningfully improve consumers’ understanding of their policy and help ensure consumers buy products that meet their needs,” Deputy Chairman Peter Kell said.

The regulator reviewed a large number of phone calls in which consumers sought further assistance.

“We are therefore considering what, if any, barriers exist to the provision of financial product advice to consumers over the telephone and whether there is any scope to review these barriers to enhance the ability of insurers to provide advice to consumers purchasing home insurance by telephone,” it says.

ASIC has contacted some insurers over potential misconduct relating to advertising that was found during the review.

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