Leading life insurance company TAL is winding back its exposure to direct insurance sales, as the model comes under pressure due to enhanced regulatory scrutiny.
The Australian Financial Review reports that TAL quietly let go of 50 staff earlier this month at a division that sells direct life, income, funeral and pet insurance known as Insuranceline.
A spokesman confirmed the redundancies saying there was a "reduction in staffing requirements" as the business focused on "achieving the best possible customer outcomes".
"A programme of change has been under way for some time in line with their strategy for the direct business... The strategy includes a move away from outbound sales channels, which also aligns with recent recommendations from the ASIC Direct review," the spokesman said.
TAL's decision to walk away from direct insurance represents a significant change in strategy for the insurer, which revealed it was collecting A$1.1bn ($780m) in annual premiums from its direct business in September 2017.
Your Money, a TV and digital financial information website, quoted an insurance executive as labelling TAL’s move as a “monumental exit”, saying it could open the door for more industry departures that could leave Australians seriously under insured.
The direct insurance model – where consumers are sold insurance online or over the phone – was caught in the crosshairs of the Royal Commission last month following revelations that insurers had used dodgy sales tactics to sell what often amounted to junk policies. One ASIC report showed that as many as three in five policies were cancelled within three years
A life insurance executive – speaking to Your Money on condition of anonymity – has said that given TAL was the original architect of direct insurance in Australia this was a “seismic shift.”
“It was the biggest player in the direct market and for many years, the only player,” the executive said.