Royal commission also hears of overcharged premiums and customers not informed their life insurance cancelled

This article is more than 2 years old

This article is more than 2 years old

Life insurance company Clearview Group has admitted to breaking anti-hawking laws more than 300,000 times, which is a criminal offence, by cold-calling people to sell them insurance.

On Monday the banking royal commission heard Gregory Martin, Clearview’s chief actuary and risk officer, conceding many of the phonecalls were targeting poor and vulnerable individuals.

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The commission heard Clearview made the unsolicited calls to Australians over a three-year period, between July 2014 and May 2017, after buying their data from third-party data providers Bradford Exchange, Greater Data, and Value Add.

It made between 300,000 and 303,000 unsolicited calls in total, during which attempts were made to sell life insurance products, representing more than 300,000 breaches of anti-hawking provisions.

Under Australia’s Corporations Act, a person must not try to sell financial products during an unsolicited telephone call or an unsolicited meeting.

The so-called “hawking” prohibition aims to prevent pressure selling of financial products to retail clients. The hawking prohibition does not apply to unsolicited communications such as emails, letters, facsimiles, brochures or media advertisements (either press, radio or television).

Martin accepted on Monday that there were breaches of a potentially criminal nature.

“You accept that there were between 300,000 and 303,000 breaches by Clearview of these criminal provisions in that three-year period,” senior counsel assisting Rowena Orr QC asked Martin.

Martin replied: “303,000 is the number of phone calls, yes.”

Orr continued: “And the number of breaches that you’ve notified Asic of?”

Martin replied: “Yes.”

“At the time that we were doing that we didn’t understand that we were breaching the anti-hawking rules, that’s nothing more complex than that, we just got that wrong … we made a mistake,” Martin said.

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The evidence came on the first day of the royal commission’s investigation of the insurance industry.

Earlier on Monday, Australia’s biggest insurance companies admitted to overcharging premiums, underpaying payouts by millions, and not informing customers that their life insurance had been cancelled.

AMP has conceded its authorised representatives had been advising customers to switch life insurance policies so they could receive large upfront commissions, while the 10 largest life insurers have admitted to paying over $6bn in commissions to financial advisers over a five-year period.

And consumer organisations have identified “claim fatigue” as a significant issue in Australia’s insurance industry, with a high number of claims being withdrawn before they are determined because consumers find the claims process so exhausting.

On Monday, the shadow minister for financial services, Clare O’Neil, said the evidence from Clearview was shocking.

“It is an enormous, appalling breach – and yet another example of sickening misconduct in the financial services sector,” O’Neil said.

“Most shockingly, this misconduct could’ve been stopped so much earlier. These potentially criminal breaches were occurring up until mid-2017 – while the Liberals were blocking the royal commission.”

This week the royal commission is investigating life insurance, next week it will investigate general insurance such as add-on insurance sold through travel insurance, car dealerships and natural disaster claims.

Senior counsel assisting the commission Rowena Orr QC said on Monday the industry was rife with financial incentives that worked against the interests of consumers.

Until January this year, life insurance companies could continue to pay financial advisers high rates of upfront and trail commissions to encourage planners to recommend their products.

Orr said the 10 largest life insurers had paid more than $6bn in commissions to financial advisers in connection with the sale of life cover in about five years.

Orr listed numerous examples of alleged misconduct and poor behaviour, which the commission will investigate over the next fortnight.

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NAB:

NAB admitted to problems with its incorrect death and total and permanent disability tests which led to customers having their claims rejected incorrectly, or receiving lower insurance payments, or being told they were not eligible for cover.

It says roughly $2.3m has been paid to those affected.

AMP:

AMP has conceded its authorised representatives had been advising customers to switch AMP life insurance policies so they could receive large upfront commissions.

AIA Australia:

AIA Australia acknowledged failing to notify up to 1,000 customers that their life insurance had been cancelled for the non-payment of premiums.

It admitted to deducting premium payments twice from customer credit cards in 2009, worth $775,000, because of a “system error”.

It admitted to underpaying customers more than $3.9m after miscalculating the pre-disablement income of policyholders who were making claims.

Allianz:

Allianz admitted customers who took out consumer credit insurance policies through car dealerships had been overcharged, leading to refunds worth $1.8m.

It failed to respond, within 10 business days, to 6,000 travel insurance claims.

After customers reduced their level of cover, it overcharged policyholders by incorrectly debiting monthly bank payments, with 2,500 customers refunded more than $650,000.