The Federal Court has found Select AFSL, which was the subject of a Royal Commission case study, BlueInc Services and Insurance Marketing Service engaged in unconscionable conduct when selling insurance products.
It also found Russell Howden, managing and sole director of Select and BlueInc, was involved and breached his duty of care and diligence as a director.
The firms, which sold life, funeral and accidental injury insurance, were named one of the “most egregious” by the Australian Securities and Investments Commission (ASIC) in 2018 when it came to poor sales practices in regional and remote communities.
ASIC’s case focused on the mis-selling of insurance over the phone to 14 consumers, 10 of whom lived in remote communities. English was not the first language of many of the consumers, and some did not fully understand the products being sold to them or that they had even been sold the insurance.
ASIC commissioner, Sean Hughes, said: “In making findings of unconscionable conduct, the Court has emphasised that consumers must have the opportunity to understand and consider the features of the insurance product they’ve been offered. ASIC will pursue those who take advantage of consumers, wherever they are, and including in remote parts of Australia. This case serves as a reminder to insurers to ensure their distributors act appropriately and put the needs of consumers first”.
The Court also found that Select and BlueInc provided conflicted remuneration to sales agents, namely, a cruise to the Gold Coast, a Vespa scooter and trips to Las Vegas and Hawaii.
The Court found Select, BlueInc and/or IMS contravened the law by:
- Coercing four of the consumers to sign up to policies by using pressure tactics such as speaking too quickly, rushing through the sales calls and ignoring repeated objections and requests for time by consumers to consider whether they wanted to buy the insurance;
- Unduly harassing five of the consumers by repeatedly contacting them and seeking payment of premiums for a policy they did not want, or could not afford;
- Making misrepresentations to 13 of the consumers about the insurance, including that optional extras formed part of a standard policy when they were an extra cost and that there were no or limited exclusions to the insurance; and
- Failing to act efficiently, honestly and fairly when providing financial services in running its ‘Refer a Friend’ program. This program saw new consumers incentivised to provide contact details for family and friends without their consent. Select’s agents then implied to those people that the referring customer had endorsed Select’s insurance policies. The Court found Howden was also involved in this contravention.
A penalty hearing was yet to be listed by the Court.
