Life insurance plays a crucial role in helping consumers manage unexpected events and protect themselves and their families against financial difficulties. Buying life insurance directly—that is, without getting personal advice from a financial adviser or buying through a group arrangement like superannuation—can be a convenient way to buy life insurance.

Direct life insurance is sold to consumers by insurers or their sales partners, by outbound telemarketing, inbound phone calls from consumers, online or face to face (e.g. through bank branches). These products are sold with general advice (meaning a consumer’s individual circumstances are not considered), or with no advice (meaning only factual information is given).

In 2016, ASIC’s review of life insurance claims handling showed higher declined claims for life insurance bought through the direct sales channel than for retail and group insurance: see Report 498 Life insurance claims: An industry review.

Following the release of REP 498, we wanted to review how life insurance products in the direct channel are designed and sold, and whether this might increase the likelihood of policies lapsing or consumers later having their claims declined.