‘Unconscionable’: Insurer preyed on Indigenous customers

An insurance company could face millions in fines after a court found practices carried out by its sales agents, which included selling products over the phone to Indigenous customers in remote areas who had difficulty understanding English, amounted to “unconscionable conduct”.

Funeral, life and accident insurance company Select AFSL has been found by a Federal Court of Australia judge to have coerced several customers to sign up to policies using pressure tactics by rushing through calls, speaking too quickly, and ignoring their objections and requests for time to consider whether they wanted to buy insurance.

The managing director of insurer Select AFSL, Russell Howden, has been found by a court to have breached his duty of care and diligence as a director.

In the judgment published on Friday, Justice Wendy Abraham also found that Select AFSL and its owner BlueInc Services provided conflicted remuneration to sales agents in the form of incentives such as a cruise to the Gold Coast, trips to Las Vegas and Hawaii, and a Vespa scooter.

Abraham said in her judgment that sales agents operated in a “very competitive environment”, and their results were recorded on a leaderboard visible to all staff. The agents who made no sales in the morning sessions “would be ridiculed, for instance, by being required to wear an inflatable doughnut or by having their chair taken away”, according to the court judgment.

A bell on the sales floor was rung every time a sale was made, and a “top dog chair” – which one ex-employee said was a big leather chair or big race car chair – was given to the top-performing sales agent for that month.

Abraham said the culture in the call centre was designed to sell more products, and the practices were known to and endorsed by senior management, including the sole director, secretary and managing director of Select AFSL and BlueInc, Russell Howden. The court also found Howden breached his duty of care and diligence as a director.

Howden told The Age and The Sydney Morning Herald that due to the ongoing court proceedings, it was “not appropriate for the respondents to make any comment at this time”.

Select AFSL was a case study at the Hayne banking royal commission in 2018. The Australian Securities and Investments Commission (ASIC) commenced the civil action against Select AFSL and Howden in September, 2019.

The case focused on 14 consumers who were sold policies through the Let’s Insure and Flexisure brands. Ten customers were Indigenous and lived in remote communities.

Abraham calls to these consumers were “pushy and persistent”, often involving a person speaking a very fast speed and using complex language. In some cases, the calls resulted in decisions to buy insurance products in as little as 20 minutes.

The agents gave no opportunity to the consumers to ask questions or reflect on what was occurring, the court found, and in a number of cases, the consumer barely spoke.

“When these consumers realised that they had acquired or bought a product that they either couldn’t afford, or didn’t want or need, they were put under real pressure not to cancel their policies and had to continue to pay premiums for some period of time,” ASIC Commissioner Sean Hughes told The Age and The Sydney Morning Herald.

“It’s reprehensible conduct, and conduct that undermines the very trust that consumers should have in financial services providers. And it is even more reprehensible when it is directed at First Nations peoples living in remote communities who simply do not have access to the tools and the resources and support to get good advice and to understand what it is that they’re seeking.”

Hughes said a key driver of the insurance sales to vulnerable customers was the unlawful sales incentive programs created for the agents.

“What we’ve seen unfortunately, for too many years is that sales representatives promoting products to consumers ... who are really being motivated by the opportunity for them to get a commission or some hidden benefit. And they’re not acting in the best interest of the consumer at all and the consumer is acquiring a product that really doesn’t suit them.”

Hughes said that the companies were being pursued for conduct which occurred between February 2015 and March 2018, and penalties at that time for this kind of misconduct ranged from a $1 million to $2.1 million per contravention. Penalties have since significantly increased.

ASIC are also seeking additional orders from the court, including orders in relation to Howden and his conduct as a director.

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