Freedom Insurance to repay $102 million to customers mis-sold insurance policies

Freedom Insurance to repay $102 million to customers mis-sold insurance policies

Photo courtesy of ASIC website. 

The Australian Securities and Investments Commission (ASIC) has secured more than $102 million in remediation costs for around 83,000 customers who were, or may have been, mis-sold insurance policies over the phone by Freedom Insurance between 2010 and 2018.

During an industry review into the sale of direct life insurance in 2018, the Australian financial markets conduct regulator identified that Freedom Insurance was undertaking harmful sales and retention practices while listening to its sales calls.

It identified Freedom Insurance was involved in practices of pressure selling, inadequate explanation of product exclusions and costs, and downgrading customers to more limited cover to close a sale.  

The report into the industry found a clear link between inappropriate outbound telephone sales conduct and poor customer outcomes, leading to ASIC banning unsolicited ‘cold call’ telephone sales of direct life insurance in 2019.

“Freedom Insurance used harmful sales practices to sell funeral, accidental death and life insurance policies to vulnerable customers. They also used unfair retention practices to keep customers in the policies when they tried to cancel,” ASIC deputy chair Karen Chester says.

“In this case, ASIC took a number of regulatory interventions. ASIC stepped in and banned the unsolicited ‘cold call’ telephone sales of direct life insurance in 2019 and subsequently commenced enforcement action against both the former managing director and former quality assurance manager of Freedom Insurance.

“At the same time, ASIC intervened with the insurers who issued the policies distributed by Freedom Insurance to appropriately compensate customers.”

The regulator is encouraging Freedom Insurance customers between 2010 and 2018 to come forward to see if they are eligible for a refund.

“We believe there are thousands of customers that likely remain entitled to a refund, but they haven’t come forward to claim it,” Chester says.  

“We encourage Freedom Insurance customers from between 2010 to 2018 who believe they were mis-sold a policy or who tried to cancel their policy without success to contact their insurers and be assessed for remediation.

“We have published information on ASIC’s website about the steps customers can take to seek a refund, including the contact details for each insurer.”

Freedom Insurance’s conduct was highlighted as a case study during the 2020 Financial Services Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

In 2021, ASIC commenced civil penalty proceedings in the Federal Court against the former managing director and former quality assurance manager of Freedom Insurance concerning the sales incentive programs offered by Freedom Insurance.

As part of ASIC’s broader work to address harms in the direct sale of life insurance, it has undertaken a range of enforcement actions and work to secure remediation for affected customers.

It commenced civil penalty proceedings against Select AFSL and others, which resulted in findings by the Federal Court of unconscionable conduct, coercion, undue harassment and misrepresentations in relation to the selling of insurance products, and contraventions of conflicted remuneration laws.

ASIC instigated criminal proceedings against CommInsure for the hawking of life insurance, which resulted in CommInsure pleading guilty, being convicted and fined $700,000.

It also secured remediation costs of $35 million from OnePath Life in 2021, $12 million from CommInsure in 2019 and $1.5 million from ClearView Life Assurance in 2018, all related to unfairly mis-sold insurance products.

Freedom Insurance no longer sells or administers insurance products. The Freedom Group companies were placed into external administration in February 2020 and have been deregistered.

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