Freedom shares hit in wake of royal commission exposure

Freedom Insurance shares sank amid doubt about earnings following an overhaul unveiled during the bank inquiry.

Freedom Insurance chief operating officer Craig Orton leaves the banking royal commission. Pic: David Geraghty

Shares in Freedom Insurance plunged as much as 12.5 per cent in early trade after the insurer said earnings for the current financial year were “uncertain”, due to the impact of ending outbound sales for some insurances.

The company (FIG) today finally told the market it would stop outbound sales of some insurances after it copped a blast for revealing the overhaul at the banking royal commission on Tuesday, without providing any formal documentation about the decision.

Freedom told the royal commission on Tuesday it had decided put an end to the outbound phone sales of life cover, trauma cover, accidental death cover and accidental injury cover. It had previously announced a suspension of marketing of loan protection cover.

Taking the stand on Tuesday, Freedom Insurance chief operating office Craig Orton said it was a decision the company could deal with without creating “unnecessary paperwork”.

Still, the company told the market in a statement today that the “significant” changes to its operations cast doubt over the impact on sales and earnings.

“The Freedom board has endorsed implementation of these management decisions,” the statement said.

Freedom said these products represented 13 per cent of total sales in the 2018 fiscal year.

It follows evidence at the royal commission from Melbourne Baptist minister Grant Stewart who revealed his son, who has Down’s syndrome, was sold a Freedom funeral policy he didn’t want or need.

The royal commission hearings also shed light on the value of the company’s insurance policies, with customers not being able to claim on the accidental death cover in cases of criminal activity, terrorism, motorised sport or travelling by helicopter.

The company had told shareholders it planned to undertake a strategic review earlier this month, in the wake of ASIC’s report on the “direct” life insurance market.

“As previously announced, Freedom continues to review its sales practices and lead sources to ensure it meets the expectations of the regulator,” Freedom said today.

“In addition, the board is conducting a strategic review of the business’ strategy, structure and operating model.

“The board confirms it has appointed Deloitte to assist with its review.

“Freedom will make further announcements regarding these matters when decisions are made by the board.”

At 11.35am (AEST), Freedom shares were trading down 8.33 per cent at 11 cents a share.