Insurer exposed for flogging products to the disabled, vulnerable

By James Mitchell

September 12 2018
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The royal commission has heard how one insurance provider sold their products over the phone to vulnerable Australian investors, including some with disabilities.

On Tuesday, the commission heard from Grant Stewart, a Baptist minister and the father of an adult son with Down Syndrome on a disability support pension. Mr Stewart told the inquiry that in June 2016 his son was sold insurance by Freedom Insurance.

“We became aware when a letter was sent to him,” Mr Stewart said.

The letter, which was submitted in evidence, stated that Mr Stewart’s disabled son had taken out a Freedom protection plan that commenced on 8 June 2016.

The protection plan had three components: an accidental death policy, with a benefit amount of $50,000; an accidental injury policy with a benefit amount of $50,000; and the ‘final expenses cash back’ policy, with a benefit amount of $10,000.

The fortnightly premium for the plan was $10.60. The first payment was due 12 days after the letter was received.

Mr Stewart said he was “staggered” upon seeing the letter and says he had no idea that his son had been sold life insurance.

“I was flummoxed, really,” he said. “I questioned our son about how this could have taken place. That was when he remembered talking to someone on the phone. He was quite distressed about it and thought he had done something wrong.”

The commission heard audio recordings of a number of phone calls between various Freedom sales agents and Mr Stewart’s son, which made clear that he was unaware what he was being sold and was in a vulnerable position.

Facing the music

During the afternoon hearings, counsel assisting Rowena Orr QC questioned Freedom Insurance chief operating officer Craig Orton about the group’s direct sales operations.

Mr Orton admitted that the recorded sales calls to Mr Stewart’s son “do not make for comfortable listening”.

“Do you accept that Freedom should not have sold those policies to Mr Stewart’s son?” Ms Orr asked.

“Absolutely,” Mr Orton said. “I think the [sales agent] knew what he was doing and it was inappropriate. I think he knew that Mr Stewart’s son was not capable of understanding what he was telling him. And he shouldn’t have been sold the product.”

The commission heard that prior to February 2017, Freedom had no training or measures in place on how to deal with vulnerable customers.

The commission also heard that the case of Mr Stewart’s son was not the only incident where Freedom was found to have sold insurance to a vulnerable person.

Ms Orr brought up a document in which Freedom had listed instances of misconduct or actions that, in its view, fell below community standards and expectations.

In October 2013, Freedom received a complaint about a sales agent attempting to contact the complainant’s disabled brother and attempting to sell him insurance.

Another entry referred to a more recent complaint, on 13 February 2017.

“The complaint was made by the mother on behalf of her disabled son,” Ms Orr explained. “The policy was cancelled and a full refund was paid. This was another instance after the sale of the policies to Mr Stewart’s son that involved the sale of policies to a disabled person whose parent called and complained about that conduct.”

“That’s correct,” Mr Orton confirmed.

Another entry related to an incident in February 2017, where a person who had suffered a stroke may not have understood the nature of the policy she had entered into.

“Freedom did not accept to the commission that this constituted misconduct, only that it constituted conduct that fell below community standards and expectations. Why was that?” Ms Orr asked.

“On reviewing the call, it was difficult to understand that that person had had a stroke,” Mr Orton said.

An incident in November last year saw a complaint made by the brother of another disabled man. Freedom accepted that the sale of insurance to the disabled man was misconduct. The man had made a number of unsuccessful attempts to cancel his policy, which drove Freedom to update its sales training for dealing with vulnerable customers.

“Why didn’t you update the vulnerable customer training after the incident involving Mr Stewart’s son?” Ms Orr asked

“I don’t know,” Mr Orton said.

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Retirement