Banking royal commission: insurer ClearView failed to punish breaches

ClearView admits it “never prioritised compliance” and failed to discipline managers who intentionally broke the law.

ClearView’s Gregory Martin leaves the banking royal commission in Melbourne. Pic: Aaron Francis

Independent life insurer ClearView has admitted it “never prioritised compliance” after the royal commission detailed a series of incentive programs, including one that read “let it rain with gift cards” for call centre staff in a company that broke anti-hawking laws hundreds of thousands of times.

On the stand for a second day at the royal commission in Melbourne, ClearView chief risk officer Gregory Martin conceded the company’s “direct” outbound call centre did not put compliance with the law first, and that the company failed to punish the head of sales after it discovered systemic non-compliance as it used high-pressure tactics to sell life insurance policies to poorer Australians.

In a series of admissions, Mr Martin agreed ClearView had 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, contravened its obligation to act honestly fairly and efficiently, failed to train its staff to be compliant, failed to comply with financial services laws and put in place remuneration and incentive structures that conflicted with customers’ best interests.

LIVE: Follow the banking royal commission

Counsel assisting the royal commission, Rowena Orr, QC, asked if the Australian Securities and Investments Commission had given ClearView any indication whether it would pursue the company over its 303,000 criminal breaches of the law or threatened the company’s financial services licence.

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

ClearView last year shut down its outbound call centre after ASIC investigated the company. ClearView is currently attempting to roll out compensation of about $1.5 million.

However, the royal commission heard the company did not take disciplinary action against managers of the direct insurance business, despite their rogue behaviour.

“None of you took any steps to discipline your head of sales over his clear intention to breach the law?” Ms Rowena Orr ask Mr Martin. “We didn’t take any action,” he said.

“Was that a satisfactory response?” Ms Orr asked. “Not in retrospect, no,” Mr Martin replied.

The royal commission heard ClearView launched “random” days of competition to reward sales staff who sold the most policies, with prizes such as 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 yesterday that after it took over the life insurance business from health insurer Bupa, ClearView used remuneration incentives of bonuses of up to $8000 a fortnight to drive sales staff to sell as many policies as possible, including through a plan to target poorer Australians. The strategy backfired, with large numbers of customers cancelling the Your Insure-branded policies sold to them or letting the insurance lapse.

“ClearView never prioritised compliance, did it?” Ms Orr asked Mr Martin as he retook the stand today. “ The direct team did not prioritise compliance, no,” Mr Martin said.

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 “Let’s rip it up” incentive days for sales staff and it considered lucrative bonuses and prizes for staff were 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. The prize was 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 staff told management 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.

It’s the latest in a series of revelations at Kenneth Hayne’s inquiry of how prizes and “soft dollar” bonuses have driven poor consumer outcomes.

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 target-beating lending won him a trip to Hayman Island, later left the company after he was found to have allegedly overvalued loans and fudged figures.

The commission also heard how Bank of Queensland’s franchise bosses do not receive any salary from the Bank of Queensland and only receive income based on commissions. They were offered annual prizes such as a BMW, travel vouchers and a waiving of the IT fee.

The mortgage broker lobby group, the Combined Industry Forum, which is pushing through reforms following the Sedgwick review of banking remunerations, is yet to clean out so-called “soft-dollar benefits” from remuneration or trailing commissions. Soft-dollar bonuses include prizes such as entertainment, cruises, trips and other non-cash rewards.

The CIF is attempting to limit entertainment and hospitality rewards to $350 per person, per event and for the soft-dollar bonuses to be recorded in a log.