An Australian insurance company sold life insurance to a young man with Down’s syndrome after calling him on the phone and extracting his debit card details.

When the man’s father called the company to complain, and to ask them how their sales agent could possibly believe that his son had understood what was happening, they did not immediately cancel the policy, and he had to chase them up with phone calls and emails.

Grant Stewart, a Baptist minister, said he was “flummoxed” as to how the company, ASX-listed Freedom Insurance, thought it was OK to sell his 26-year-old son more than $100,000 of life insurance, because it would have been clear on the phone that his son had an intellectual disability.

He said his son was left distressed by the experience, and he was now apprehensive about answering his phone.

“He believed he’d done something wrong and was quite embarrassed and didn’t know what he’d done,” Stewart said.

Stewart said his son had reasonable numeracy and literacy skills – and that’s why he had his own debit card – but if he wanted to buy something he needed to call his parents so they could explain to him if it was worth the money.

The evidence was heard at the banking royal commission on Tuesday, which is continuing its interrogation of the insurance industry.

The commission heard recordings of phone calls between Freedom’s sales agent and Stewart’s son, revealing how the son came to share his debit card details with the company.

In the recordings, the son agreed to purchase accidental injury and accidental death policies for $10.60 a fortnight, with some payments to kick in after three days, after lengthy explanations of the products by the sales agent.

Stewart said he only realised that his son had purchased the products when a letter arrived at their home.

He called Freedom to ask what had happened, and to cancel the insurance, but they wouldn’t cancel the policy immediately. A representative told him she’d look into his complaint and call him back, but she never did call him back.

Stewart said it took numerous phone calls and emails to resolve the matter, and he ended up filing a complaint with the Australian Securities and Investments Commission.

It took two years for them to send him the recordings and transcripts of the phone calls between his son and Freedom’s sales agent.

Craig Orton, Freedom’s chief operating officer, apologised to Stewart during Tuesday’s hearings.

He also said Freedom had decided in July this year that its sales staff should stop trying to collect bank details during first phone calls.

Hard sell

The royal commission also heard evidence that sales staff at the life insurance company ClearView were trained to cold call potential customers on the phone and sign them up to insurance as quickly as possible, above their objections, before sending them documentation to read, in breach of the law.

The strategy gave customers no time to think about the decision, because ClearView did not want them to reflect on the products they were buying.

The banking royal commission heard further evidence from Gregory Martin, ClearView’s chief actuary and risk officer, on Tuesday.

On Monday, Martin admitted that ClearView had broken anti-hawking laws more than 300,000 times, which is a criminal offence, by cold calling people to sell them insurance between July 2014 and May 2017.

On Tuesday, the commission heard how ClearView staff were trained to handle someone on the phone who asked for more time to think about the products they were being offered.

ClearView staff were told to ignore pleas from people, and sign them up to insurance products despite any objections they may hear, and then read from this transcript: “I completely appreciate where you’re coming from. I like to think about important decisions as well. Is this because you like to read over everything in black and white? Me too. The great thing is that I’m going to send out everything to you in black and white for you to read over to make sure everything I’ve told you makes sense. Putting the [insurance] cover in place today means you will have the peace of mind that you’re covered as soon as you hang up the phone.”

Martin admitted on Tuesday that ClearView’s tactics resulted in a lot of customers signing up for products that they did not need or want.

Senior counsel assisting, Rowena Orr QC, asked: “Were ClearView sales agents trained in this way to sign people up immediately because ClearView was worried that if it gave people time to understand the products they were purchasing they may not choose to purchase them?”

Martin: “That seems to be, that was the training that was given to them, yes.”

Orr said: “Or they might realise that they had no need for this sort of product.”

Martin: “I agree.”

Orr said: “It resulted in a lot of customers signing up for and paying for products that they didn’t need or want, didn’t it?”

Martin replied: “Yes it did.”

Orr said: “ClearView didn’t want to give people time to reflect before making the purchase, did they?”

Martin replied: “No, the direct business didn’t.”

Orr continued: “Or the opportunity to be influenced in that purchasing decision by someone else, like their partner or a friend?”

Martin replied: “No. That’s correct.”

Orr said: “And the purpose of this objection handling system was to ultimately wear down the customer to the point where they no longer viewed their objection as a point worth continuing to raise?”

Martin said: “You either wear them down or sidestep them.”

The royal commission also heard how ClearView held “incentive days” to encourage staff to sell as many insurance policies as possible, and how one incentive program in late 2016 included a travel package to Queenstown, including accommodation and entertainment, as an award for higher sales.

The commission was told ClearView recorded the trip as a training or educational trip to “circumvent regulatory barriers” put in place by the Future of Financial Advice (FoFA) conflicted remuneration laws.

Orr said: “The head of direct sales within ClearView knew that this was conflicted remuneration, a breach of the FoFA reforms, knew that it would breach regulatory provisions, knew that it was a breach of the law and therefore elected to package it deceptively as a training or educational trip?”

Martin said: “I couldn’t actually tell you if it would be a breach of the law but the very thought that he thought it could be and decided to circumvent was the thing that concerned me.”

Martin admitted there was no consequences for the head of direct sales at ClearView for attempting to circumvent the law.

ClearView later closed its direct sales business after an Australian Securities and Investments Commission (Asic) investigation found ClearView had sold over 16,000 policies unfairly through its call centres.