ASIC has today commenced civil penalty proceedings in the Federal Court against Select AFSL Pty Ltd (Select), BlueInc Services Pty Ltd (BlueInc), Insurance Marketing Services Pty Ltd (IMS) and director Russell Howden alleging breaches of the law arising from telephone sales of life and accidental injury insurance issued by St Andrew’s Life Insurance Pty Ltd under the brand names ‘Let’s Insure’ and ‘FlexiSure’ during the period 1 February 2015 to 19 March 2018.
ASIC’s action follows Select’s appearance before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Round 4 - Experiences with financial services entities in regional and remote communities).
ASIC alleges that Select, BlueInc and/or IMS, in their dealings with 14 consumers, engaged in conduct in breach of provisions of the Australian Securities and Investments Commission Act 2001 (Cth), including for some or all of the consumers:
- unconscionable conduct when selling insurance and/or taking payment details over the phone, and when consumers attempted to cancel their insurance policies;
- undue harassment;
- coercion; and/or
- making false and/or misleading representations.
Of the 14 consumers, nine lived in remote communities, and many faced barriers in understanding what was being sold to them because English was not their first language.
ASIC’s proceedings also include claims that Select, BlueInc and Mr Howden breached provisions of the Corporations Act 2001 (Cth) in relation to the provision of conflicted remuneration to sales agents, including a cruise to the Gold Coast, a Vespa scooter and trips to Las Vegas and Hawaii.
Against the companies, ASIC is seeking declarations, civil penalties, injunctions, advertising orders, probation orders requiring the implementation of a compliance program and consumer redress. Against Mr Howden, ASIC is seeking declarations, civil penalties, injunctions and disqualification orders.
The proceedings are to be listed for case management on a date to be determined by the Court.
Background
On 30 August 2018, ASIC released REP 587 The sale of direct life insurance which summarised the findings and recommendations from ASIC's review of the sale of direct life insurance products – that is, insurance sold without personal advice and outside group cover, such as the telephone sales model adopted by Select. Select was one of 11 firms included in that review.
REP 587 found some firms engaging in sales conduct that created risks of consumers buying products they did not want, could not afford or that did not meet their needs. ASIC committed to a range of further action including enforcement action against individual firms as appropriate, and a ban on outbound sales calls which were linked to particularly poor consumer outcomes.
ASIC recently consulted on its proposal to ban unsolicited telephone sales of direct life insurance and CCI. The public consultation period closed on 29 August 2019. ASIC is currently reviewing submissions from consumer groups, industry and other interested parties.
ASIC has also conducted a number of other reviews relating to life insurance, including funeral insurance:
- Report 454: Funeral insurance: A snapshot highlighted high cancellation rates linked to insurers failing to ensure consumers understood the features of the products at the time of sale.
- Report 498: Life insurance claims: An industry review summarised ASIC’s analysis of life insurance claims including for term life, income protection, trauma, and total and permanent disability. ASIC found higher declined claims for direct life insurance, which raised concerns that these products were not performing as consumers or their families expected at claim time.
- Report 588: Consumers’ experiences with the sale of direct life insurance sets out the results of research into experiences in buying life insurance directly, including that some consumers struggled with the sales experience and the complexity of the products.
ASIC has taken action in other cases of mis-selling or inappropriate conduct in the sale of direct life insurance. For example, ClearView refunded over $1.5 million to 16,000 customers after an ASIC review found it used unfair and high pressure sales practices when selling consumers life insurance policies by phone (18-029MR).
ASIC’s MoneySmart website has information for consumers about buying life insurance, including a life insurance claims comparison tool to compare how life insurance companies have handled claims in the past, and a life insurance calculator that consumers can use to work out whether they need life cover or how much cover they might need.
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Editor's note:
On 13 September 2019, the matter was listed for a first case management hearing in the Federal Court (Sydney), before Justice Lee at 9.30am on 30 September 2019.
Editor's note 2:
The case management hearing scheduled for 30 September 2019 has been adjourned until 4 October 2019.
Editor's note 3:
The matter has been listed for further case management hearing on 31 January 2020.
Editor's note 4:
The matter has been listed for further case management hearing on 30 April 2020.
Editor's note 5:
The matter has been listed for further case management hearing on 9 November 2020.
Editor's note 6:
The matter has been listed for a 10 day hearing, commencing at 10:15am (EST) on 1 March 2021.
A case management hearing will be held on 29 January 2021.
Editor's note 7:
A case management hearing was held on 29 January 2021.
Editor's note 8:
On 8 February 2021, ASIC filed an interlocutory application for leave to file a Further Amended Statement of Claim. The Defendants opposed ASIC’s application. An interlocutory hearing was held on 16 February 2021 before her Honour Justice Abraham. Abraham J reserved her decision.
Editor's note 9:
On 19 February 2021, her Honour Justice Abraham delivered judgment on ASIC’s interlocutory application for leave to file a Further Amended Statement of Claim. Her Honour granted leave to ASIC to file the Further Amended Statement of Claim with a majority of the amendments proposed by ASIC. Her Honour also re-listed the liability hearing to commence on 31 May 2021, for a duration of 10 days.
Editor's note 10:
Between 31 May and 11 June 2021, the scheduled 10-day liability hearing took place before the Federal Court in Sydney. The judgment has been reserved.
Editor's note 11:
In July 2022, the Federal Court found that Select, BlueInc and IMS engaged in unconscionable conduct when selling life, funeral and accidental injury insurance. Read ASIC's media release 22-176MR.
Editor's note 12:
The matter has been listed in the Federal Court NSW for a relief hearing on Thursday, 23 March 2023 at 10:15 am.