For many Aussies, there’s nothing worse than being stuck on the phone with a telemarketer, especially when you’ve got a million things to do.
But according to a recent investigation by ASIC, life insurance sales are doing more than just irritating the everyday Aussie.
The research found that 1 in 5 of the policies taken out over the phone were cancelled during the cooling off period, which can be anywhere between 14 – 30 days.
And of those that made it past the cooling off period, 1 in 4 policies were then cancelled within 12 months, with 3 in 5 policies cancelled in three years.
RELATED: Are you one of the 242,000 Australians making this switch?
“Life insurance is a long-term product but cancellation rates and poor claim outcomes show that people are being sold products they don’t want, can’t afford, or don’t perform as they expected,” said ASIC Chair, James Shipton.
Where firms went wrong
ASIC listened to more than 540 recorded calls and found that one of the biggest mistakes made by firms was failing to provide adequate information about the important features of the policies, like exclusions and premium increases.
There was also evidence of pressure selling techniques, including callers refusing to send out paperwork unless a customer committed to purchasing a policy.
“Aggressive selling practices and products that don’t pay out when consumers expect undermine trust in the industry. However, selling direct life insurance can be done well and we have seen this where firms have moved away from riskier business models, such as outbound sales and reliance on products with broad exclusions,” said Shipton.
RELATED: Are you shrinking your tax refund by skipping these simple insurance deductions?
The rising number of policy hoppers
Although many Aussie understand the importance of having a life insurance policy on their side, recent figures by Roy Morgan revealed that Aussies are finding it difficult to find the right policy.
Around 242,000 Australians switched their life insurance policies in the 12 months to June 2018, while another 766,000 approached other providers with the intention of switching but instead stayed put.
The big reason Aussies are jumping from policy to policy? Premium cost.
More than 40% of respondents admitted that their motivation for switching was to find a better price for their premium.
“Life and risk insurance is likely to be regarded as a grudge purchase and is often included with superannuation or switched as a result of price as we have seen in this release,” said Roy Morgan’s Industry Communications Director, Norman Morris.
“In the last 12 months, one million risk and life insurance policies, or 10.8% of the market, were either switched to another company or were under consideration to do so.”
RELATED: How AI is making it easier to take out life insurance
So whether you’re looking to make the switch yourself or just want to find the right policy on your own terms, check out our life insurance comparison tool.