Court finds dealer group ‘acted unconscionably when selling insurance products’

The Federal Court has found that Select AFSL (Select), BlueInc Services (BlueInc) and Insurance Marketing Service (IMS) “engaged in unconscionable conduct when selling life, funeral and accidental injury insurance”.

The Court also found that Select and BlueInc managing and sole director, Russell Howden, breached his duty of care and diligence as a director as he was involved in some of the contraventions.

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The news comes after ASIC conducted a review of the direct life insurance industry in 2018 and identified Select’s conduct to be “one of the most egregious”.

The corporate regulator’s investigation focused on 14 consumers who were mis-sold insurance over the phone; 10 of whom lived in remote communities and some who did not speak English as their first language.

Select, BlueInc and or IMS were found to have contravened the law by:

– coercing four of the consumers to sign up to policies by using “pressure tactics” such as speaking too quickly, rushing through the sales calls and ignoring repeated objections and requests for time by consumers to consider whether they wanted to buy the insurance or not;

– unduly harassing five of the consumers by repeatedly contacting them and seeking payment of premiums for a policy they did not want, or could not afford;

– making misrepresentations to 13 of the consumers about the insurance, including that optional extras formed part of a standard policy when they were an extra cost and that there were no or limited exclusions to the insurance; and

– failing to act efficiently, honestly and fairly when providing financial services in running its ‘Refer a Friend’ program which saw new consumers incentivised to provide contact details for family and friends without their consent.

“In making findings of unconscionable conduct, the Court has emphasised that consumers must have the opportunity to understand and consider the features of the insurance product they’ve been offered. ASIC will pursue those who take advantage of consumers, wherever they are, and including in remote parts of Australia. This case serves as a reminder to insurers to ensure their distributors act appropriately and put the needs of consumers first,” ASIC commissioner Sean Hughes said.

“ASIC is resolutely committed to protecting the most vulnerable consumers where they are targeted by mis-selling. A key driver of Select’s mis-selling was the unlawful sales incentive programs created for the agents, which were condoned by the companies’ managing director.”

Justice Abraham added: “It can readily be inferred from the call, and the manner in which it progressed, that [the consumer] was not in a position to push back. [The sales agent] kept pushing through, brushing aside her concerns. He took advantage of her position.

“It would have been obvious to the [sales agent], that he was able to do so.”

A penalty hearing is yet to be scheduled by the Court.