Updated: Nov 15, 2021
When you reflect upon the global history, culture and skill of the 'cowboy', describing the conduct alleged against these insurers as the conduct of cowboys places these insurers on a richly underserved pedestal.
ASIC vows to cleanup insurance cowboys
James Frost - Financial Services Writer
AFR - Sept 9, 2019 - 4:03pm
The corporate watchdog is suing the operator of a boiler room that fired up backpackers with booze cruises and ritzy overseas trips to flog junk insurance to vulnerable people including Indigenous Australians.
The Australian Securities and Investments Commission filed the action against Select AFSL, BlueInc Services, IMS and director Russell Howden for in the Federal Court's NSW registry on Monday morning.
ASIC deputy chair Daniel Crennan said the regulator would be seeking a significant penalty from the parties involved.
“If you are selling insurance that people don’t need, don’t want or don’t understand we will investigate and if we find evidence we are likely to bring proceedings against them,” Mr Crennan said.
ASIC is alleging the companies and their representatives broke multiple provisions of the Corporations Act and the ASIC Act. While not all of the laws carry a financial penalty, it is understood a bill could run into the tens of millions of dollars.
Court documents list 14 examples of vulnerable customers who were lied to, misled or otherwise bulldozed into buying insurance policies they had no use for.
Disability pensioner Josephine Shadforth is among the case studies. She was brow-beaten into buying a second funeral insurance policy by a sales agent who was in the running to win a four-night trip to the Gold Coast and a Vespa scooter.
The regulator says non-monetary benefits or incentives are in breach of laws on conflicted remuneration. ASIC’s Mr Crennan described the practice of handing out holidays and motor scooters to insurance agents as “quite strange”.
The companies and their employees used high-pressure sales tactics to bulldoze customers into buying insurance they didn’t want, need or understand.
In another example, a sales agent trying to win a trip to Las Vegas gave the hard sell to a man attending a funeral who was known as Freddie Lewis. Despite his protests, they extracted his credit card details and played a recorded message of a product disclosure statement down the phone.
When his credit card was cancelled they contacted him 27 times looking for payment and said that if he was unemployed he could still get the premiums taken out of his Centrelink payments.
According to the documents, sale agents would make false or misleading statements about the policies, ignore statements from customers, would not allow customers to reflect on information, didn’t ask if they could afford them and declined requests to cancel the policies.
The company also did not disclose the policies would step-up, or rise in price, after a certain time or that there were often significant exclusions to the policies.
ASIC and Mr Crennan are hoping for a speedy resolution after the business practices of the company were explored in the sixth round of the Hayne royal commission and rounded on by the Commissioner in his final report.
The royal commission took evidence from Kathy Marika of Bangarra Dance Company – who is also named as a victim in the suit – who was targeted by the firm and had tapes of her calls submitted as evidence.