The corporate regulator has warned the life industry over direct sales practices after a review found “notable deficiencies” remain despite a crackdown following the Hayne royal commission.

The Australian Securities and Investments Commission says that while there have been improvements, weaknesses persist in product design, sales and pay practices, retention and cancellation terms, and handling of complaints.

On remuneration, some life insurers have moved away from sales-only targets to use compliance and customer engagement as their main measures of staff performance.

But a few still compare agents’ sales volumes against expected metrics while also incorporating compliance measurements into their key performance indicator structures. 

The regulator found many life insurers focus their sales and pay practice reviews on successful sales calls and fail to check a targeted number of non-converting calls.

“Continued prominence of sales volume and targets can incentivise high-pressure or misleading sales tactics contrary to the interests of consumers,” ASIC commissioner Alan Kirkland says in a letter to industry CEOs.

The commission reviewed documents and policies from a sample of life insurers and distributors between July 2021 and June last year to see if consumer outcomes had improved since the last examination in 2018. The Hayne financial services royal commission published its final report in 2019. 

On product design, the review found some life companies make limited use of customer feedback and rely heavily on sales data during the design phase, despite post-Hayne changes requiring the industry to sell covers that are in the interests of targeted consumers.

“The steps you take in responding to the matters identified … will inform ASIC’s response if we identify conduct of concern, commence investigations or take enforcement action,” Mr Kirkland says in the letter to insurers.

Financial Rights Legal Centre senior policy and advocacy officer Drew MacRae says it is “extremely disappointing, if not gobsmacking, that some insurers don’t seem to have learnt the lessons of the financial services royal commission and continue to link pay to sales volumes and targets incentivising high-pressure or misleading tactics”.

Council of Australian Life Insurers CEO Christine Cupitt says the industry is committed to providing products and services that meet consumers’ needs.

“CALI looks forward to working closely with ASIC on its recent findings to ensure direct life insurance sales live up to the high standards Australians deserve,” she said.