BENGALURU (REUTERS) - Australia's corporate regulator on Wednesday (Dec 4) banned telephone sales of life insurance after an inquiry into the financial sector last year found "cold calling" had been abused to get customers to sign up for products they did not need.
The ban effective from Jan 13, 2020, would "stop practices that lead to poor consumer outcomes and destroy trust in the financial system", Australian Securities and Investments Commission (ASIC) director Sean Hughes said in a statement.
"From January, firms will no longer be able to call consumers out of the blue and use sophisticated sales tactics to pressure people into buying life insurance and (consumer credit insurance) products."
Among the many examples of abuse that shocked the country when they were revealed last year, the powerful Royal Commission inquiry heard an account of a telephone salesperson selling a complicated insurance product to a man with Down Syndrome who clearly did not understand what he was buying.
CommInsure, the life insurance arm of Australia's largest lender, Commonwealth Bank of Australia, was convicted for breaches of an anti-hawking law last week and fined A$700,000 (S$651,877) for selling life insurance policies over unsolicited phone calls between October and December 2014.
CommInsure had broken the law because it failed to provide customers of its Simple Life product with product disclosure statements before making the telephone sales, according to media reports. It avoided the maximum penalty of A$1.85 million by entering an early guilty plea.
ASIC said it had also commenced civil penalty proceedings against Select AFSL over telephone sales of life and accidental injury insurance.
The new ban does not go as far as restrictions recommended by the royal commission, which called for a total ban on hawking of pension plans and insurance that experts said would further restrict the ability of vertically integrated businesses to cross-sell products, The Australian Financial Review said.