Freedom ended dubious sales practices for accidental death insurance just days before appearing before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, and then failed to disclose this information to the Commission last week.
Freedom chief operating officer, Craig Orton, admitted to Senior Counsel assisting the Commission, Rowena Orr QC, that a decision was made to stop selling four of Freedom’s six insurance products through outbound sales calls in a conversation between himself and the insurer’s chief executive and head of marketing late last week.
When asked by Orr why Freedom had failed to disclose this to the Commission last week, Orton admitted that it should’ve.
He resisted, however, Orr’s questioning as to how such a decision had not been better documented, after a revelation that there were no records of the policy change.
“It was a decision that we could make without creating unnecessary paperwork,” Orton said.
While Orr suggested that this decision was surely a “significant” one worth recording, considering that it meant that four of the insurer’s six products would no longer be sold through outbound calls, Orton disagreed. He argued that these products made up less than 15 per cent of Freedom’s total sales.
Orr also introduced evidence showing that prior to making this decision, Freedom was made aware that improper sales practices would come under fire at the Commission.
Freedom’s most lucrative product, funeral insurance, would continue to be sold by outbound calls “at this stage”, with Orton saying that Freedom was talking through sales practices with the Australian Securities and Investments Commission (ASIC) now.
Considering that Orton previously said that the firm stopped outbound sales for some products as it thought it “better to not do that at the moment considering regulatory concerns about giving customers the right information”, Orr suggested that it had retained the technique for funeral insurance because it benefited so much from selling the product.
While Orton acknowledged Freedom did benefit from keeping outbound sales for the product, he said it kept outbound sales for it as the insurer could provide 12-month free cover on the product, in which time customers could learn more about it.
Orr then questioned why consumers were being sold a product before fully understanding it, if 12 months were needed for them to gain full awareness.
