Direct insurer Freedom Insurance has halted of the sale of new life insurance products several months after the Hayne commission heard it was selling to vulnerable people, including a man with Down syndrome.
In a statement to the ASX, Freedom said it would implement a number of initiatives as part of a strategic review undertaken with the assistance of Deloitte.
Initiatives include a “cessation of new sales, changes to senior management, reduction in staff and operating costs, and modification to internal processes and remuneration of employees”.
“The board has determined there is no immediate commercially viable option to recommence sales of its life products,” Freedom said.
“However, Freedom will continue to assess alternative business models that may arise which would enhance shareholder value and deliver enhanced customer outcomes.”
The Freedom board also took the view that it’s required to make remediation payments in relation to affected customers.
It expects to make a provision for net remediation costs in its financial accounts for the period ending 31 December 2018 of between $3 million and $4 million.
“Freedom is currently undertaking a detailed review to determine the size and scope of such remediation, which will be reviewed and approved by an independent expert,” Freedom said.
In September, the Hayne royal commission heard from Grant Stewart, a Baptist minister and the father of an adult son with Down syndrome on a disability support pension.
Mr Stewart told the inquiry that in June 2016 his son was sold insurance by Freedom Insurance.
“We became aware when a letter was sent to him,” Mr Stewart said.
“I was flummoxed, really. I questioned our son about how this could have taken place. That was when he remembered talking to someone on the phone. He was quite distressed about it and thought he had done something wrong.”
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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