ASIC’s scathing investigation into life insurance has drawn its first official blood after the corporate regulator imposed conditions on the Australian financial services (AFS) licence of Suncorp-owned Guardian Advice.
In October, ASIC released the findings of a year-long investigation into hundreds of randomly selected files from a variety of licensees, including Guardian.
The investigation, which found 37% of life insurance advice given to consumers is so poor it does not meet the minimum standards required by law, ASIC found deficiencies in the advice Guardian provided to retail clients, prompting concerns it was not properly supervising its 257 authorised representatives.
It is understood ASIC began investigating Guardian after it became aware the firm had hired a number of staff from AAA Financial Intelligence and AAA Shares, both of which had had their licenses cancelled in early 2013.
“ASIC was interested to ensure Guardian Advice had in place adequate monitoring and supervision processes to deal with these representatives,” a spokesperson says.
“ASIC has previously warned the market about the need to ensure they have robust recruitment processes, especially when appointing representatives who have worked for a business against which ASIC has taken action.”
Guardian has about 130,000 clients across the country.
Under the news conditions, Guardian must appoint an ASIC-approved independent consultant to review its compliance with its general licensee obligations and develop a plan to rectify any deficiencies the expert identifies.
ASIC Deputy Chairman Peter Kell says: “The weaknesses in Guardian Advice’s systems and controls show that there was an ongoing risk that unsuitable advice could be provided by Guardian Advice and its authorised representatives.
“This outcome underlines ASIC’s strong commitment to lifting standards in the life insurance sector. When we come across instances that raise issues for the confidence consumers have with advice, we will take action.”
ASIC is considering other enforcement action, including banning certain individuals.