Banking royal commission: Life insurance boss accused of not being ‘frank’ with inquiry

The boss of life insurer Select AFSL has been accused of not being “frank” with the royal commission.

The managing director of life insurer Select AFSL, that used high-pressure sales tactics to push Let’s Insure-branded funeral plans on Aboriginal customers, has been accused of not being “frank” with the royal commission, after he sought to prevent its information being disclosed voluntarily to the year-long inquiry.

Russell Howden, who heads up the company Select AFSL, denied that he had not been honest with the royal commission, at hearings in Darwin on Thursday.

Select AFSL sold the Let’s Insure policies that were underwritten by Bank of Queensland’s formerly owned life insurance arm St Andrews.

In a series of emails and letters presented to the royal commission by counsel assisting Rowena Orr, St Andrews in March this year had asked Mr Howden for consent to share with the royal commission the issues it had identified in Select AFSL’s sales practices to Aboriginal customers. Mr Howden was told by St Andrews that Bank of Queensland was aware the corporate regulator knew of the funeral insurance issues, and that it may have informed the royal commission of issues.

Bank of Queensland was required by the royal commission to tell the royal commission all instances of misconduct and conduct falling below community standards over the last decade. Mr Howden did not give his formal consent to St Andrews, the royal commission on Thursday heard.

In a response to St Andrews, Mr Howden said: “Thank you for your email. We do not consent with the request to voluntarily disclose confidential information of Select about the issues as defined by you.”

Bank of Queensland told Mr Howden it was “disappointed” with the response. “It is highly likely the royal commission has received or will receive information on both matters from ASIC and will be aware of our relationship,” BOQ said. “If the commissioner becomes aware of the matters relating to Select’s distribution of St Andrews funeral insurance and life insurance policies, he may be minded to issue BOQ with a notice to produce material relating to these issues”

Select again refused consent to disclose the information, the royal commission heard. Mr Howden said the company received legal advice not to agree with “a blanket waiver” to disclose all confidential information.

“We do not consider there to have been any misconduct or falling short of community standards or expectations arising out of any matter which would bring it within the scope of the banking royal commission,” Mr Howden told BOQ.

Mr Howden admitted to the royal commission on Thursday there had been “incidents”.

“You did not voluntarily disclose anything to the royal commission?” Ms Orr asked Mr Howden. “You did not permit them to disclose the conduct, nor did you voluntarily disclose the conduct?” she asked. Mr Howden responded: “Correct.”

“We always said we would co-operate with the royal commission. We didn’t want to agree to give a blanket waiver in terms of what was private with our agreement with St Andrews,” he said.

Later, Mr Howden agreed that Select’s sales practices had breached the Corporations Act, which prevented the company from providing personal advice to prospective customers.

The royal commission, which is holding hearings in Darwin this week to probe instances of financial services misconduct in dealing with Aboriginal and Torres Strait Islander people, examined Let’s Insure’s sales practices, which found high-pressure sales tactics drove a huge increase in sales to Aboriginal customers.

Bank of Queensland’s former life insurance arm St Andrews, which was underwriting the Let’s Insure products, discovered a sharp “spike” in 2015 of policies being sold to Aboriginal customers. In 2015, the share of funeral policies Let’s Insure sold to Aboriginal customers doubled to 8 per cent of all policies. St Andrews, which was owned by Bank of Queensland from 2010 and recently sold for $65 million, launched a review of its business following a scathing report by the Australian Securities & investments Commission into the funeral insurance industry.

The royal commission heard that while only 2 per cent of customers who signed up for Let’s Insure funeral insurance policies were sold policies by telemarketers, almost 20 per cent of Aboriginal customers were sold policies by telemarketers. A BOQ spokeswoman said Let’s Insure was operating under its own regulatory licenses and the bank alerted the corporate regulator to the high rate of Aboriginal customers that were being signed up to policies.

Earlier in the day, the royal commission heard how sales staff at Select that pushed funeral insurance policies on thousands of Aboriginal customers were not disqualified from a “battle” to win a paid trip to Las Vegas by selling as many policies as possible, even if they broke company policies that would represent a breach of the Corporations Act, the royal commission has heard.

Mr Howden told the royal commission staff were not disqualified from competing for the Las Vegas trip even if they breached policies by failing to give general advice warnings, failing to obtain consent from customers to set up direct debits or omitted policy exclusions and giving personal advice.

Royal Commissioner Kenneth Hayne interjected to ask whether the company’s disciplinary procedures failed to clamp down on illegal behaviour. The royal commission heard under its points-based demerit system, Select AFSL sales agents could engage in two unethical sales, or two instances of providing personal advice, every six weeks without being sacked as demerit points were reinstated at the end of the six week period.

“Does it follow form the evidence you have given, that giving personal advice which is a breach of the law, was not treated by your organisation as grounds for dismissal?” Mr Hayne asked.

Mr Howden said the company did not “have many unethical sales” and defended the company’s penalty regime. “We have to allow the agent some room to move,” Mr Howen told the royal commission. “You’ve got to get the balance right,” he said.

The royal commission, which is holding hearings in Darwin this week to probe instances of financial services misconduct in dealing with Aboriginal and Torres Strait Islander people, examined Let’s Insure’s sales practices, which found high-pressure sales tactics drove a huge increase in sales to Aboriginal customers.

Yesterday it was heard that a Vespa scooter worth $6000 and a cruise to the Sunshine Coast were offered as reward for selling policies. On Thursday, counsel assisting the royal commission Rowena Orr presented a third incentive program for sales staff: “A paid holiday to buzzing Las Vegas, Nevada USA!”

Under the company’s incentives programs, sales staff were awarded one point for every sale of a policy they made. There was a deduction of two points in the competition tally for any sales that failed compliance standards, but employees were not disqualified from the competition.

Employees were told it was “every salesman for themselves” when competing for a $6000 Vespa scooter, a cruise on the Pacific Pearl to the Sunshine Coast with $75 daily drinks package, and a paid trip to Las Vegas with a $500 cash card.

“You were pitting you sales agents against each other in battle,” counsel assisting the Royal Commission Rowena Orr said. “It has an impact, doesn’t it Mr Howden?” she asked. Mr Howden responded: “I agree with you.”