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The 'horror week' in insurance revealed

The banking royal commission has put the spotlight on the Australian insurance industry.
The banking royal commission has put the spotlight on the Australian insurance industry.

The Royal Commission has exposed shocking stories and despicable actions from Australia’s financial institutions that millions of Aussies have put their faith in.

Last week it was the insurance industry in the firing line, with ugly truths emerging from insurers ClearView, Freedom Insurance, CommInsure and TAL.

Here are some of the damning revelations aired last week by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry:

ClearView Wealth used aggressive and unlawful practices to sell insurance

Gregory Martin, the chief actuary and risk officer at life insurance and financial advice company ClearView, admitted that ClearView call centre staff broke the law hundreds of thousands of times – “somewhere between 300,000 and 303,000 times over a period of just three years” – by trying to sell life insurance to people who may not have consented to receiving such calls.

Also read: Is this Australia’s biggest tax scandal?

The anti-hawking provisions of the Corporations Act stipulates that people are not allowed to make unsolicited calls about insurance unless certain conditions are met, such as reading a product disclosure or having a prior conversation where the customer has consented to take a sales call. Doing so is a criminal offence.

“At the time that we were doing that, we didn’t understand that we were breaching the anti-hawking rules. It’s a – it’s nothing – that’s – that’s nothing more complex than that,” Martin told the royal commission.

“We just got that wrong. We made a mistake.”

Martin also admitted that salespeople targeted lower socio-economic groups in particular who may not have been able to afford life insurance and that aggressive sales tactics were used to get them to buy insurance.

Freedom Insurance: Sold to vulnerable customers through “aggressive” sales tactics

Sales incentives such as boat trips, holidays to Bali and Vespa scooters fuelled an “aggressive” sales culture at Freedom Insurance, resulting in ruthless sales tactics being used to target vulnerable customers, the royal commission heard.

Also read: Royal commission shines light on disability exploitation

One sales campaign, sent in an email to Freedom staff read: “We’ve got $150 to give away in today’s incentives. [The] target is 400 lives by lunchtime. Everyone aiming for seven over the first two sessions. 3.5 lives per session (Easy Peasy) and we’ll smash 400 lives to lock in the incentive money for the last part of the day.”

Another read: “Get on the phone and sell, sell, sell, with one thing in mind – get to Bali.”

Even more distressing revelations came from was Grant Stewart, the father of a 26-year-old man with Down Syndrome, speaking of how his son, felt “distressed” about being pushed into a life insurance policy in a cold call that disturbed even Freedom’s CEO.

Also read: Insurer sold policy to ‘distressed’ man with Down Syndrome

The royal commission then heard a recording of the call, which clearly demonstrated that Stewart’s son didn’t understand what he was signing up for.

CommInsure: Made it difficult for people to make claims and lied in their ads

The Commonwealth Bank of Australia’s insurance arm, CommInsure, came under fire for obscure or outdated medical definitions after it was heard that one woman’s claim for breast cancer treatment was rejected because it didn’t meet the policy’s definition of “radical breast cancer surgery”.

It defined ‘radical breast cancer surgery’ as removal of an entire breast, a definition which hadn’t been updated since 1998.

Although CommInsure did eventually update its definition in May last year, it wasn’t backdated, meaning the woman – who had paid premiums for twenty years – was still unable to make her claim.

CommInsure managing director Helen Troup had to answer questions about the insurer’s advertising material, such as web pages, pamphlets and brochures.

Also read: Aussies misled by CommInsure ads

Troup admitted that the ads did not specify that trauma coverage of heart attacks only covered heart attacks of a specific severity, conceding that it was misleading to consumers.

TAL: Claimant suffered bullying at the hands of TAL staff

The royal commission heard how a nurse grappling with anxiety disorder was spied on by a private investigator who was hired by insurance company TAL.

After she was denied a mental illness claim by TAL, her policy was cancelled without warning. She took it to the Financial Ombudsman Service (FOS) which eventually found the case in her favour and ordered TAL to reinstate her policy and pay her benefits, with interest.

But a TAL case manager searched the nurse’s name on the internet and hired a psychiatrist and a private investigator, who followed her around and produced reports on her movements and intimate activities, to stop her income protection payments and discredit her.

The royal commission also heard that the customer’s mental health condition deteriorated as a result of the treatment she suffered at the hands of the insurer, according to a report by an independent psychiatrist.

TAL general manager Loraine van Eeden faced up to questioning at the major inquiry. Eeden was hired by the insurance giant in January and admitted TAL fell below legal obligations to act efficiently, honestly and fairly.

The royal commission’s focus on insurance will continue this week.

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