ASIC secures over $102 million in remediation for Freedom Insurance customers, with more to come

ASIC has now secured over $102 million in remediation for around 83,600 customers who were, or may have been, mis-sold insurance policies over the phone by Freedom Insurance Pty Ltd (Freedom Insurance) between 2010 and 2018.

ASIC is encouraging Freedom Insurance customers from between 2010 and 2018, to come forward to see if they are eligible for a refund.

ASIC identified the harmful sales and retention practices of Freedom Insurance in its 2018 review of the sale of direct life insurance. The conduct was subsequently highlighted as a case study during the Financial Services Royal Commission. In response, ASIC:

  • announced the implementation of a ban on the unsolicited ‘cold call’ telephone sales of direct life insurance and consumer credit insurance in 2019 (19-335MR);
  • commenced civil penalty proceedings in the Federal Court in 2021 against both the former Managing Director and former Quality Assurance Manager of Freedom Insurance in relation to the sales incentive programs offered by Freedom Insurance (21-279MR);
  • has secured a significant remediation program for customers. Currently, over $102 million has been paid, or assessed as due to be paid, to around 83,600 customers adversely affected by the conduct of Freedom Insurance.

ASIC Deputy Chair Karen Chester said, ‘Freedom Insurance used harmful sales practices to sell funeral, accidental death and life insurance policies to vulnerable customers. They also used unfair retention practices to keep customers in the policies when they tried to cancel.’

‘In this case, ASIC took a number of regulatory interventions. ASIC stepped in and banned the unsolicited ‘cold call’ telephone sales of direct life insurance in 2019 and subsequently commenced enforcement action against both the former Managing Director and former Quality Assurance Manager of Freedom Insurance.

‘At the same time, ASIC intervened with the insurers who issued the policies distributed by Freedom Insurance to appropriately compensate customers,’ added Ms Chester.

‘We believe there are thousands of customers that likely remain entitled to a refund but they haven’t come forward to claim it. We encourage Freedom Insurance customers from between 2010 to 2018 who believe they were mis-sold a policy, or who tried to cancel their policy without success, to contact their insurers and be assessed for remediation. We have published information on ASIC’s website about the steps customers can take to seek a refund, including the contact details for each insurer,’ Ms Chester said.

AIA Australia, NobleOak Life, Swiss Re Life & Health Australia and ClearView Life Assurance issued the policies distributed by Freedom Insurance.

AIA Australia, NobleOak Life, Swiss Re Life & Health Australia commenced the Freedom Insurance Remediation Program in February 2020 for customers sold policies between October 2010 and October 2018.

ClearView Life Assurance commenced a separate remediation program in June 2022 for a smaller number of affected customers. It aims to remediate customers who were sold accidental death and accidental injury, and life insurance policies between July 2011 and February 2014.

Background

In 2018, ASIC’s Report 587 The sale of direct life insurance (REP 587) found a clear link between inappropriate outbound telephone sales conduct and poor customer outcomes. ASIC’s 2018 review, which included listening to sales calls by Freedom Insurance, identified issues of pressure selling, inadequate explanation of product exclusions and costs, and downgrading customers to more limited cover to close a sale.

In 2019, ASIC banned the unsolicited ‘cold call’ telephone sales of direct life insurance. This ban was superseded by reforms to the anti-hawking regime under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, which took effect on 5 October 2021.

In addition, as part of ASIC’s broader work to address harms in the direct sale of life insurance, a range of enforcement action and work to secure remediation for affected customers has been undertaken, including:

  • the commencement of civil penalty proceedings against Select AFSL and others, which resulted in findings by the Federal Court of unconscionable conduct, coercion, undue harassment and misrepresentations in relation to the selling of insurance products, and contraventions of conflicted remuneration laws (22-176MR);
  • $35 million in remediation paid by OnePath Life to life insurance customers who were sold life insurance over the phone (21-169MR);
  • $12 million in remediation paid by CommInsure to life insurance customers for unfair telephone sales (19-314MR);
  • criminal proceedings against CommInsure for hawking of life insurance (19-313MR), which resulted in CommInsure pleading guilty, being convicted and fined $700,000 (19-324MR); and
  • $1.5 million in remediation paid by ClearView Life Assurance Limited for poor life insurance sales practices (18-029MR).

Freedom Insurance no longer sells or administers insurance products. The Freedom Group companies were placed into external administration in February 2020 and have been de-registered.

ASIC’s Moneysmart website provides guidance for buying life insurance including the Life Insurance Calculator to help consumers assess their needs.

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