Freedom Insurance pushed accidental death policy on man with Down syndrome
Freedom Insurance staff pressured a 26-year-old man with Down syndrome into signing up for an accidental death policy, despite no indication that the man understood what he was agreeing to, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry heard on Tuesday.
Grant Stewart’s son was sold an accidental death insurance policy by Freedom Insurance in 2016.
Mr Stewart told the Royal Commission that while his son has “reasonable” literacy and numeracy, he needs assistance in some matters, particularly the meanings of certain words.
He and his wife are co-signatories on their son’s account to assist him in making spending decisions, and he often contacts them for advice on whether something is reasonably-priced.
Mr Stewart said that it took 15 minutes for Freedom Insurance to agree to cancel the policy.
As the policyholder, Mr Stewart’s son joined the call, and it is clear from recordings played to the Royal Commission that his son has difficulty with verbal communication.
Although the company’s representative said recordings of the call in which Mr Stewart’s son signed up did not indicate that he had a cognitive impairment, the operator in the initial call clearly realised assistance was needed and ended the call.
Mr Stewart’s son was unassisted in the second call, when he signed up for funeral, accidental death and injury assurance.
After quickly going through the conditions, Mr Stewart’s son agreed to the policy.
“I really don’t think during the call that our son indicated any understanding of what he was signing up for,” Mr Stewart told the Royal Commission.
“[The operator] had a script in front of him and he was asking the questions that needed to be asked until he got the answers that he wanted.”
Freedom Insurance chief operating officer Craig Orton apologised to Mr Stewart and his son, and said he believed the sales agent who sold the insurance knew Mr Stewart’s son didn’t understand the policy.
Freedom Insurance told the Royal Commission on Monday afternoon that it was ceasing outbound sales calls for four of its six products, a decision that Mr Orton says was made by the head of marketing, the Chief Executive Officer and himself.
Taking the stand on Tuesday, Mr Orton amitted that Freedom Insurance had used “downgrading” to market accidental death policies as a “cheap alternative” to life insurance.
The training manual for “retention officers” whose role is to “offer alternatives” to customers states that officers “must offer accidental death and injury cover” and “will fail your quality assurance if you don’t.”
The Australian Securities and Investment Commission (ASIC) is highly critical of this approach because customers end up with extremely limited cover and the risk of accidental death is low relative to the premiums paid.
Mr Orton conceded portraying accidental death policies as cheap alternatives is poor practice, and that the policy of offering alternatives is inappropriate.
Although Freedom Insurance’s sales staff receive unlimited commissions for successful sales, they start in “commission debt” — owing the cost of employing them plus the cost of calls that don’t meet quality assurance standards.
Once they sell enough policies to cover those costs, they start receiving commission on top of their base pay.
Under questioning from Ms Orr, Mr Orton agreed that the commission structure had the effect of incentivising aggressive sales tactics from staff.
Staff were also incentivised with a trip to Bali and a Vespa scooter.
Mr Orton said he was “livid” with these approaches.
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