Freedom chief operating officer, Craig Orton, has admitted to Senior Counsel, Rowena Orr QC at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that “aggressive sales practices” within his organisation led to poor outcomes for customers.
Orr “put squarely” to Orton that the commission structure that had been in place at Freedom in recent years had created a situation where sales agents had been incentivised to aggressively pursue sales, and that this was likely to, and had in fact, led to poor customer outcomes.
“I agree – I think all incentives have that effect,” Orton told Orr. “I think it can lead to poor customer outcomes – not on every occasion – but we’ve got some examples here today, which I can only apologise for.”
Orr pointed out that there had been “serious problems” with the company’s insurance commission structure or “balance scorecard,” both in terms of incentivising poor sales agent behaviour and in terms of non-compliance with the law since 1 January 2018.
Orton said while he thought the balance scorecard was “trying to do the right thing” in terms of quality assurance, he thought it “fell short”.
Citing Orton’s language from his own statement, Orr also pointed out that Freedom had offered regular and one-off incentive schemes beyond commissions for its sales agents for some time, the purpose of which was to “specifically and deliberately drive sales”.
Orr cited a recent email sent from Orton to the Freedom sales team: “Hi all, I feel like giving a bit of money away. It will run from now until close of business tomorrow. Oldies, anyone that gets eight funeral lives or more will go into a draw on Monday morning.”
“Newbies, anyone who gets six funeral lives or more will go into a draw on Monday morning. Every life over your target you will get a bonus entry. $100 to give away, first prize $70, second prize $30. Get selling – show me the money!”
Orr asked: “What observations do you have to make about this sales campaign, Mr Orton?”
“I think it’s absolutely inappropriate … and it will not happen under my watch,” he responded.
Orr asked if Orton believed this was likely to drive highly aggressive and inappropriate sales practices so that people could meet their targets and be eligible “for the money”.
“I do,” Orton said, as Orr submitted the first among several emails to Royal Commissioner Kenneth Hayne as evidence, before she continued to provide further examples of non-commission incentives, including offers of places on a boat party, trips to Bali, and Vespa scooters.
Orton ultimately agreed with Senior Counsel Orr that the aforementioned practices could result in consumer detriment.
