Banking royal commission: Insuruer admits may have been more than 300,000 cold-call law breaches

Independent life insurer ClearView admits it could have breached anti-hawking provisions more than 300,000 times.

Independent life insurer ClearView Wealth has admitted to potential criminal breaches of anti-hawking laws more than 300,000 times and targeting unsuspecting poor Australians with inferior policies they couldn’t afford and on which they rarely claimed, the royal commission has heard.

ClearView chief actuary and risk officer Gregory Martin told the royal commission on Monday ClearView had breached the anti-hawking provisions in laws that prevent unsolicited and pestering sales of life insurance policies over a three-year period, but that he couldn’t “remember the number (of breaches) off the top of my head”, before estimating the breaches at “10,000 or 12,000 times”.

However, in a series of letters and documents shown to the royal commission, it was revealed ClearView found more than 300,000 instances where it couldn’t tell if it was complying with the law.

The anti-hawking provisions is a criminal provision which prohibits life insurers selling to a person in unsolicited calls unless the insurers meet several requirements, including offering customers to join the do-not-call register and giving them a product disclosure statement before the sale.

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The royal commission is probing the life insurance “direct” model, where outbound call centres hound customers into buying products that may not be suitable or affordable for them. The direct channel was banned last month by the Australian Securities & Investments Commission after finding claims denial rates were stubbornly high and consumers weren’t being sold reliable products.

ClearView closed down its call centre last year after ASIC raised concerns about high pressure sales and the company has committed to pay $1.5 million in compensation already.

Mr Martin told the commission that Clearview customers “didn’t opt in sufficiently to meet the definition of solicited call” in breach of the anti-hawking provisions. ASIC also raised concerns customers were not provided with the PDS, or were having the PDS information read to them, or that customers were given a chance to opt out of the calls. ASIC was concerned ClearView had “systemic” issues in complying with the anti-hawking legislation for at least three years.

A letter from ClearView to ASIC shown to the commission warned that, following a review of its telephone contacts with Bupa health insurance customers and other leads, the company found more than 260,000 phone calls where it couldn’t identify whether it had complied with the anti-hawking provisions. This was then subsequently revised upwards a number of times.

“All up, by early May 2017, ClearView had estimated it breached the anti hawking provisions …. between 300,000 and 303,000 times over a period of just three years,” counsel assisting Rowena Orr said. “That’s a bit different to the figure you have me just a bit earlier,” Ms Orr told Mr Martin.

Mr Martin said his previous estimate was for calls that resulted in a sale, rather than just the call.

“The anti-hawking provisions have to be complied with whether or not the call results in a sale,” Ms Orr said, reminding Mr Martin that the breach was a criminal offence.

Ms Orr asked whether ClearView accepted it breached the anti-hawking law up to 303,000 times.

“That could be the total of it,” Mr Martin said.

Clearview also faced questioning over whether it intentionally targeted its Your Insure-branded product to poor Australians differently to its approach in selling products to its usual, wealthier demographic.

“It was poorer people that were being targeted by Your Insure?” Ms Orr asked. Mr Martin responded: “I emphasise it was poorer not poorest. You can’t build a business on that. It was not meant to go down to the lowest or particularly low (socio-economic band) … but that’s where it was finding itself,” Mr Martin said.

Ms Orr fired back: “I would say poor, you would say poorer people.”.

Mr Martin said the company ended its strategy of targeting “lower value, higher volume” customers after it discovered “some of those customers were coming from a demographic within society that couldn’t afford” the policies.

“They were potentially marketing to a demographic that was perhaps to low for those products,” Mr Martin said.

Ms Orr said “it was being sold to people who could not afford the product”, as evidenced by the fact customers were cancelling the policy or allowing it to lapse after a few payments.

Ms Orr asked why ClearView was emphasising the “emotional pitch” in its sales to poor customers, which differed in its approach to selling to wealthier customers that also emphasised the logic of taking life insurance. “The sale is a very short process. The products tend to be bought more on emotional type reaction rather than necessarily deep-type thinking,” Mr Martin said.

The royal commission also heard customers who couldn’t qualify for life insurance due to pre-existing conditions were “downgraded” to lesser-value products such as accidental death insurance, which are largely useless policies that cover events like falling from a ladder or losing a limb. ClearView only paid out about 25 per cent of all the revenue it collected through accidental death policies in claims to customers over a five-year period. In one particular year, it kept 99 per cent of all policy revenue as only 1 per cent was paid on claims.

“They’re inferior products, that’s what this document tells us?” Ms Orr said. Mr Martin responded: “I would agree they were of lesser value.”

Ms Orr asked whether “no one makes claims under the product?” Mr Martin responded: “The claims numbers are low. That’s correct.”

“The intention of ClearView is not to offer rubbish products to the market,” Mr Martin said.

ASIC last month released a report calling on companies to shut down their outbound sales centres or face legal action, and to end all sales of accidental death insurance, labelling it a useless form of insurance.