ASIC weighs up penalties for ClearView

ASIC is weighing up “the appropriate response” after ClearView Wealth admitted breaking the law more than 300,000 times.

Gregory Martin from Clearview, leaves the banking royal commission in Melbourne yesterday. Picture: Stuart McEvoy.

The corporate watchdog is weighing up “the appropriate response” after independent life insurer ClearView Wealth admitted to breaching criminal laws more than 300,000 times and confessed to a range of unconscionable and deceptive conduct.

Although the Australian Securities & Investments Commission forced ClearView to shut down its disastrous “direct” life insurance business, where outbound call centres targeted poor Australians with useless policies they couldn’t afford, and secured a $1.5 million remediation program, the regulator has not taken any legal action or threatened its financial services licence.

ClearView chief risk officer Gregory Martin admitted to the royal commission yesterday that the Sydney-based company engaged in unconscionable and misleading and deceptive conduct, that it had breached the duty of utmost good faith, that its processes led to customer detriment, that it contravened its obligation to act honestly, fairly and efficiently, that it failed to train staff in compliance, that it failed to comply with financial services laws and that it put in place remuneration and incentive structures that conflicted with customers’ best interests.

This was on top of admissions a day earlier that ClearView ­breached criminal anti-hawking provisions more than 300,000 times with a mountain of cold calls that fell well outside the bounds of the law.

“ASIC is aware of the evidence given to the royal commission in relation to ClearView (much of it having been provided by ASIC) and is determining the appropriate response,” a spokesman for the regulator said. “At this stage ASIC cannot comment further.”

ClearView shares closed down 7 per cent to their lowest point in more than two years yesterday.

Senior counsel assisting the royal commission, Rowena Orr QC, asked whether ASIC had given ClearView any indication whether it would pursue the company over its admitted 303,000 criminal breaches of the law or had threatened the company’s licence.

“Nothing to that effect. At this stage I don’t know that they are doing anything further,” Mr Martin told the commission.

It was “difficult” to reconcile the twin aims of running a financially viable outbound life insurance sales business and complying with the law, he concluded.

The comments came after a torrid two days of public grillings, where Mr Martin admitted ClearView’s outbound division “never prioritised compliance” as the royal commission detailed a series of problematic incentive programs for sales staff, including incentives that were known to be in breach of the law and another that promised to make it “rain” with gift cards for staff.

Mr Martin also said the company had failed to punish the head of sales after it discovered systemic non-compliance.

The use of incentives for sales staff has been a recurring issue in of Kenneth Hayne’s year-long ­inquiry. “None of you took any steps to discipline your head of sales over his clear intention to breach the law?” Ms Orr asked Mr Martin.

“We didn’t take any action,” he said.

“Was that a satisfactory response?” Ms Orr asked.

“Not in retrospect, no.”

Under Future of Financial Advice reforms in 2013, conflicted remuneration was banned. The reforms also touched on “soft dollar” benefits such as prizes and payments to attend fancy conferences.

However, the royal commission heard ClearView had so-called “Let’s rip it up” incentive days for sales staff and that it believed lucrative bonuses and prizes for staff were a necessary part of the business, including launching “random” days of competition to reward sales staff who sold the most policies with gift cards.

An email shown at the royal commission showed managers attempting to whip up excitement among staff. “I’m putting a random incentive day..... I want this joint pumping with belling, clapping and SALESSSSSS … LET IT RAIN WITH GIFT CARDS!!!!!”

The commission heard that after ClearView took over the life insurance business from health insurer Bupa, it used remuneration incentives of up to $8000 a fortnight to drive sales staff to sell as many policies as possible, including a plan to target poorer Australians. The strategy backfired, with large swathes of customers cancelling the Your Insure-branded policies sold to them or letting the insurance lapse.

The royal commission heard managers in the company viewed the sales rewards as a necessary part of the business.

“ClearView decided that an injection was required to stimulate the team and revive the cultural pulse,” Ms Orr told the royal commission, reading from an email between managers.

The sales drive would take place over a five-month period and would force call centre staff to compete to enter the top third of performing sales staff for a special trip to the New Zealand ski town of Queenstown, with paid travel, accommodation and entertainment.

“This is not a junket or a celebration, it’s an investment. Strategic projects such as this should be seen as a necessary cost,” ClearView management said in an email.

Mr Martin conceded it was an “inappropriate activity”. “We really started to understand the culture within that business was not what we thought,” he told the royal commission.

Quality assurance staff lacked qualifications, experience, supervision and resources, the commission heard.

In June, the royal commission heard that sales staff at Select who pushed funeral insurance policies on thousands of Aboriginal customers were not disqualified from an incentive “battle” to win a paid trip to Las Vegas — even if they broke company policies and breached the Corporations Act. A Vespa scooter and a Sunshine Coast cruise were also offered as incentives.

Earlier, the commission also heard a “champion” bank manager at Commonwealth Bank subsidiary Bankwest, whose lending won him a trip to Hayman Island, later left the company after he was found to have allegedly overvalued loans and fudged figures.