ASIC commences court action against insurers over phone sales

ASIC has begun 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.

The company regulator’s action follows Select’s appearance before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and 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 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.

Last year the regulator released Report 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.

The report 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.

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 Howden, ASIC is seeking declarations, civil penalties, injunctions and disqualification orders.

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.