Three insurance companies have been slapped with a $13.5 million penalty from the Federal Court for breaching laws when selling life, funeral and accidental injury insurance, with a former managing director ruled out from managing corporations for five years.
On Tuesday, the Federal Court handed down a penalty judgment to Select AFSL, BlueInc Services and Insurance Marketing Services (IMS) for engaging in “unconscionable conduct” and contravening financial services laws.
Former managing director of insurer Select AFSL Russell Howden was banned from managing corporations for five years.
Federal Court Justice Wendy Abraham said the breaches by the insurance companies were “by their very nature objectively serious”.
“Misrepresentations were made,” Abraham said. “High-pressure tactics were applied. Sales tactics were used to overbear the free will of consumers. Having made the sales, retention agents ignored the express wishes of the consumers to cancel policies and acted so as to wear them down.”
The court ordered Select to pay $7.7 million, BlueInc to pay $4.4 million and IMS to pay $1.4 million. The companies will also need to establish a compliance, education and training, and internal operations review program at their own expense.
Select AFSL was a case study at the Hayne banking royal commission in 2018, with the Australian Securities and Investments Commission commencing civil action against the company and its managing director at the time, Russell Howden, in September 2019.
ASIC deputy chair Sarah Court said the judgement was substantial, particularly given the size of the companies involved. Credit: Alex Ellinghausen
The case focused on 14 consumers who were sold policies through the Let’s Insure and Flexisure brands, 10 of whom were Indigenous and lived in remote communities.
In July 2022, the court found a number of contraventions by Select, BlueInc and IMS, including selling products over the phone to Indigenous customers in remote areas who had difficulty understanding English, as well as contraventions by Howden.
