More than one-third of consumers advised on life insurance by financial planners received advice that failed to meet relevant legal standards, an Australian Securities and Investments Commission survey found.ASIC also found that, even when advice met the standard for compliance with the law, there was significant room for improvement.The regulator determined that the method of remuneration had a statistically significant bearing on the likelihood of the client receiving advice that did not comply with the law.In the 202 files surveyed, the pass rate for advisers receiving upfront commissions was 55 per cent, while the pass rate for advisers paid under other remuneration models was 93 per cent. Upfront commission rates are typically between 100 per cent and 130 per cent of the new business premium."Our findings in this review indicate that the impact of adviser conflicts of interest on the quality of life insurance advice is an industry-wide problem," ASIC said.Indicators of poor quality advice included failure to ask basic questions about the circumstances of the client and the client's family members, failure to perform a needs analysis, and recommendations that clients pay a significant proportion of their superannuation guarantee contributions into life insurance. As a result of poor advice consumers received inferior policy terms, paid more than they needed to for cover, had health issues excluded and had claims denied where previously they had cover.There was also evidence of unnecessary switching of clients between policies to maximise commission income.The premium value of individual life risk policies (including life, total and permanent disability, trauma and income protection) in 2013 was A$8.4 billion, with 2.6 million policies in force.ASIC said it was considering enforcement action in cases where advice did not comply with the law.The survey also revealed that lapse rates were high. For stepped premium products (the most common policy type) lapses were seven per cent in the first year, rising to 14 per cent in the second year and remaining around that level for the next three years before tapering.Factors behind high lapse rates were product changes (new features and pricing), age-based premium changes affecting affordability and churning by advisers.ASIC has made a number of recommendations, including a call for licensees to review their remuneration structures to remove "misaligned incentives" and review their business models to make sure they support "strategic" life insurance advice.An issue for policymakers is that the ban on conflicted remuneration in the FOFA reforms does not extend to individual life insurance sales under personal advice. Commission payments for life risk sales are exempt.