Finance Finance News Royal Commission: ASIC found insurer continued with unacceptable practices

Royal Commission: ASIC found insurer continued with unacceptable practices

Russell Howden
Russell Howden said telephone sales tactics were "gross abuse".
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Funeral insurer AFSL continued to use unacceptable sales practices almost three years after learning they had led to a spike of inappropriate sales to Indigenous communities, the financial services royal commission has heard.

In February 2018, a letter to Select AFSL from ASIC identified the company had continued to use poor sales practices and had an unacceptably high dropout rate from clients within the first year, indicating they were unhappy with what they had been sold.

Sales driven processes also led to poor outcomes, ASIC said.

Select AFSL chief executive Russell Howden denied his staff had refused to allow a new client to cancel the policy she had been unwillingly signed up to a week earlier – despite the commission hearing a recording of the sales call.

The client, Kathy Marika, a Yolngu Aboriginal woman for whom English is a second language, had been signed up to two funeral insurance policies covering herself, her children and grandchildren.

The deal was made despite Ms Marika telling a telemarketer from Let’s Insure (AFSL’s trading name) that she was happy with insurance she already had with Media Super, through her work with Bangarra Dance Theatre.

A week later, Ms Marika called back Let’s Insure to say she didn’t want the policies because they were too expensive. But the representative used high pressure tactics to dissuade her.

When Ms Marika told the representative the new policy was unaffordable, it was suggested she put it on hold for a month.

““We can give you the next month free,” she was told. In response, Ms Marika eventually agreed and said she was happy with the arrangement.

When questioning Mr Howden, counsel assisting Rowena Orr QC characterised the conversation as Ms Marika being “talked out of it”. Mr Howden disagreed, saying she had been “convinced to keep it” and was “given a fair solution”.

However, he eventually conceded, “the whole call was terrible”.

“I accept it failed,” he said. “I cannot defend that call.”

Let’s Insure made more calls to Ms Marika, seeking details of family members and friends so more policies could be sold.

Mr Howden said this was a “gross abuse” of the company’s referral program.

Ms Orr said Let’s Insure’s remuneration policies created the incentives that led to the misconduct. Therefore, the conduct wasn’t surprising.

Mr Howden also argued with Ms Orr about AFSL’s co-operation with the commission. He denied the company had refused to co-operate, saying it simply followed legal advice to submit only details requested by its underwriter, St Andrews.

Quoting correspondence between AFSL and St Andrews, Ms Orr said it showed the company had claimed “there had been no misconduct or conduct beneath community standards and expectations”.

“You did not voluntarily disclose anything to the royal commission,” Ms Orr said.

“Correct,” Mr Howden eventually conceded.

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