Professional indemnity insurers have told the Australian Securities and Investments Commission that they will consider the risks of lead-generated superannuation switching when underwriting financial advice licensees, after the regulator wrote to them about it earlier this year.
ASIC disclosed the approach in its report on 15 Australian financial services (AFS) licensees that use lead generation services. It said it wrote to 15 PI insurers in April about the risks in high-volume super-switching advice models that rely on lead generators, and that several had confirmed they would take those risks into account in underwriting.
The report also showed how far insurers were already aware. ASIC said eight of the 15 licensees reviewed had told their insurer they used lead generation services. One more was contacted by its insurer after appearing on ASIC’s public list of entities involved in lead generation.
Lead generators brought the 15 licensees more than 7,600 clients between January 2025 and June 2026, according to the report.
ASIC identified weak controls at some of the businesses. Some licensees had only limited access to their lead generators’ call recordings and relied heavily on manual supervision. Others did not monitor patterns in their advisers’ product recommendations closely enough, or failed to put adequate caps on how many clients each adviser could take on. The regulator also found examples of unlicensed or unqualified lead generators performing parts of the advice process.
“Licensees permitting or using lead generation models are putting their licence at risk,” the report said.
ASIC said licensees that did not know what their representatives and outsourced providers were doing, could not produce the records needed to test compliance, or failed to act on warning signs were exposing consumers to harm and breaching their obligations.
The review follows the collapse of the Shield and First Guardian funds, in which about 12,000 investors lost a combined $1 billion. Many of those investors were reached through lead generation and super-switching advice.
The insurer contact marks a shift in how ASIC is using the PI market. Instead of relying only on enforcement, the regulator has given underwriters information that could affect the price and availability of cover for licensees with lead generation exposure.
It also builds on ASIC’s existing focus on PI. In September, ASIC reported the results of its first annual sweep of PI data from advice licensees. It found 10 licensees reporting cover below the $2 million minimum, nine of them because of data entry errors. The same coverage noted that PI is meant to stop AFCA determinations going unpaid. When cover fails, those costs move to the Compensation Scheme of Last Resort, which is funded by levies on the rest of the advice industry.
For brokers placing PI for advice licensees, the report raises a practical disclosure question. A licensee that uses lead generation and has not told its insurer may have a problem at claim time, depending on the policy terms and what it disclosed when cover was placed. Insurance Business reported earlier this year that renewals were likely to bring sharper questions about referral arrangements, and ASIC’s letter makes those questions more likely.
ASIC has also gone after lead generators directly, including Federal Court proceedings against Clark Family, which it alleges sold consumers’ insurance enquiries to the highest-bidding broker.
The PI market is now being asked to price conduct that ASIC itself is still policing. Licensees with lead generation in their client pipeline are likely to face higher premiums or narrower cover, and possibly both. Brokers who can show insurers how a licensee supervises its referral sources will have the strongest case at renewal.
