ASIC Action Leads to CommInsure Refunds of $12 Million for Unfair Life Insurance Telephone Sales

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australian securities and investments commission

ASIC Action Leads to CommInsure Refunds of $12 Million for Unfair Life Insurance Telephone Sales

November 21, 2019

ASIC - life insuranceFollowing concerns raised by ASIC about unfair telephone sales of life insurance, The Colonial Mutual Life Assurance Society Limited (trading as CommInsure) has conducted a remediation program. The refunds are to policyholders who were Commonwealth Bank customers between 2010 and 2014 and were sold a range of life insurance products via telemarketing calls by Aegon Insights Australia Pty Limited (formerly known as Aegon Direct Marketing Services Australia Pty Ltd) (Aegon).

During ASIC’s review of direct life insurance (REP 587 The sale of direct life insurance) ASIC identified concerning sales practices by CommInsure. Concerns were raised by ASIC with CommInsure about sales of its accidental death insurance product called ‘Accident Protection’, including that:

  • almost half of all policies sold in 2012-13 were cancelled by the consumer during the cooling-off period or within six months, suggesting consumers may have felt pressured to buy the policy      then realised they did not want it or could not afford it;
  • inadequate or unclear descriptions of the product were given, which was particularly concerning due to the extremely limited cover provided by the policy;
  • sales were completed in as little as eight minutes, raising concerns about how the consumer could have made an informed decision about a complex insurance product; and
  • sales representatives often selected the level of cover on behalf of the consumer, further reducing the likelihood that consumers were getting cover that met their needs.

After ASIC raised concerns about the sales of CommInsure’s Accident Protection product, CommInsure identified similar concerns with the telemarketing of a range of other life insurance products sold by Aegon between 2010 and 2014.

‘ASIC is concerned that the way in which these products were sold was manifestly unfair, with customers given insufficient information to make an informed decision,’ ASIC Deputy Chair Daniel Crennan QC said.

CommInsure has completed a majority of the remediation payments and expects to finalise the remediation program by the end of 2019, with refunds to around 30,000 customers expected to exceed $12 million.

Background

The sales calls of concern to ASIC were conducted by Aegon on behalf of CommInsure. The contact details for customers were supplied by Commonwealth Bank of Australia, of which CommInsure is a wholly-owned subsidiary.

The remediation program addresses sales conduct issues identified following ASIC’s initial concerns about sales of the Accident Protection policy. The remediation program will apply to outbound telemarketing sales of Accident Protection, Injury Cash Protection, Term Life Protection, Home Loan Protection and Simple Life products sold since 1 January 2010:

  • CommInsure will provide full refunds of premiums paid (plus interest) to consumers whose policies lapsed within 6 months, and partial refunds of a majority of premiums paid (plus interest) to      consumers whose policies lapsed between 6 and 12 months.
  • Given that the description of certain exclusions applied to these products at the point of sale was inadequate and unlikely to provide the consumer with sufficient information to make an informed decision, CommInsure will waive a range of exclusions for both future and retrospective claims. This will include re-assessing past claims that were declined on the basis of certain exclusions.
  • For CommInsure’s Injury Cash Protection product, the definition of Permanent and Total Disablement was significantly broadened in 2017 – CommInsure will retrospectively assess declined claims against the broadened definition.
  • Some technical errors applying to CommInsure’s Accident Protection product will be addressed, including the mis-application of a ‘public holiday benefit’ when assessing claims, and the failure to implement ‘partner discounts’ which were offered to some customers during sales calls. Affected consumers will be paid the additional claim benefit, or refunded the discount that was not applied, plus interest.

CommInsure stopped offering Term Life Protection and Home Loan Protection in July 2012, Injury Cash Protection and Accident Protection in late 2013, and ceased all outbound telemarketing sales of life insurance in December 2014.

CommInsure has today pleaded guilty to 87 counts of offering to sell insurance products in the course of non-compliant unsolicited telephone calls (19-313MR).

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