Comparison site Choosi hit with ASIC claims that it misled consumers and pocketed $61m

Insurance comparison group Choosi has been accused of misleading customers over recommendations for funeral and life insurance policies – and pocketing $61 million in commissions from an associated company that was a distributor of these policies.

The Australian Securities and Investments Commission (ASIC) has filed Federal Court action against Choosi, a company that promotes itself as working with “a range of trusted insurance brands, so we can make their policies available to you”.

However, ASIC is alleging that Choosi, from at least 1 July 2019, only compared policies issued by a single insurer, other than for “one limited exception”.

The corporate watchdog is alleging that all policies recommended by Choosi were distributed by Greenstone Financial Services, a company that is associated with Choosi.

The policies were issued by Hannover Life Re of Australasia from which Choosi received “substantial sales commissions”.

ASIC says this effectively made the comparison service a “distribution platform for funeral and life insurance policies issued by Hannover”.

“The only funeral policies that consumers could compare through Choosi’s comparison service were policies issued by Hannover,” says ASIC in its Federal Court filing.

“The same was true in respect of life insurance policies, save only for the fact that during part of the relevant period, the comparison service included a single policy from one additional insurer.”

This has been revealed to be a Swiss Re Life & Health Australia policy sold under the Woolworths Life Insurance brand.

ASIC alleges that at least 4,225 funeral insurance policies and 9,478 life insurance policies were sold during the relevant period, with Choosi receiving $61 million in commissions. ASIC also alleges that Choosi is currently continuing with the practice.

The corporate regulator says the legal action against Choosi is aimed at stopping companies taking advantage of consumers trying to shop around for the best deals.

“We allege Choosi misled thousands of consumers into thinking they were comparing options from a range of insurers,” says ASIC deputy chair Sarah Court.

“We will contend people were led to believe they were making a sensible decision by comparing policies; however, they were denied genuine choice.

“Consumers may have been encouraged to buy a funeral or life insurance policy when a cheaper or more suitable policy might have been available from other insurers that were not assessed.

“Comparison websites must provide a meaningful comparison service and not simply operate as a sales channel or distribution platform for companies.”

ASIC alleges Choosi made the misleading representations on its website, across social media, and via television commercials and advertorials.

Court says that while comparison sites can sometimes be useful for consumers, they should only be part of how people shop around for financial products.

Choosi is facing a potential maximum penalty of $16.5 million should ASIC prove that the company misled consumers.

The action against Choosi follows other recent consumer-focused law suits launched by ASIC including Snaffle, Resimac and Hollard Insurance.