Mr Martin accepted that Clearview may have engaged in misconduct in a number of respects. Those concessions were properly made.
In respect of the anti-hawking issues, Mr Martin accepted that ClearView may have breached the prohibition on the hawking of financial products contained in section 992A of the Corporations Act up to 303,000 times between early 2014 and mid-2017.[1] This flowed from ClearView’s acknowledgments, to both ASIC and the Commission, that there were 303,000 calls in respect of which ClearView could not positively verify that there had been no breach of that provision.[2] With that said, I recognise, consistently with ClearView’s submissions, that it is unlikely that each and every call involved a breach.[3]
In respect of the mis–selling issues, Mr Martin accepted that in the calls in which ClearView representatives mis–sold insurance policies between 2013 and 2016, ClearView may have, on occasion, breached the prohibition on unconscionable conduct contained in sections 12CA and 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) by pressuring individuals to purchase policies.[4] Mr Martin also accepted that in these calls, ClearView representatives may have breached the prohibition on misleading or deceptive conduct contained in section 12DA of the ASIC Act, by misrepresenting matters such as whether customers were committing to purchase an insurance policy, and the terms of those policies.[5]
Mr Martin also accepted that ClearView may have failed to discharge its general obligations as an Australian financial services licensee in four respects:
- First, ClearView may have contravened the obligation contained in section 912A(1)(a) of the Corporations Act to do all things necessary to ensure that the financial services covered by its Australian financial services licence were provided efficiently, honestly and fairly.[6] ClearView’s systemic failures in its sales processes meant that policyholders were frequently being sold policies in circumstances where ClearView was not behaving honestly or fairly.
- Second, ClearView may have failed to ensure that its representatives were adequately trained to provide the financial services covered by its Australian financial services licence, in contravention of section 912A(1)(f) of the Corporations Act.[7] ClearView sales agents were encouraged to sell aggressively, sign up customers immediately, and use other inappropriate methods of obtaining sales.[8]
- Third, ClearView may have failed to take reasonable steps to ensure that its representatives complied with financial services laws, in contravention of section 912A(1)(ca) of the Corporations Act.[9] ClearView had inadequate training, quality assurance and compliance processes to ensure that its representatives complied with financial services laws.
- Fourth, ClearView may have failed to have in place adequate arrangements for the management of the conflict of interest that it created between the interests of its representatives and the interests of its customers, in contravention of section 912A(1)(aa) of the Corporations Act.[10] The remuneration and incentive structures that ClearView had in place encouraged sales agents to make as many sales as possible, sometimes to the detriment of customers’ best interests.[11]
The matter having been drawn to ASIC’s attention, it is for ASIC to determine what further action it can and should take.
ClearView did not take speedy or effective action to address substantial compliance issues when they became apparent. As I noted earlier, Mr Martin’s evidence was that the compliance issues that were identified in the 42 calls provided to ASIC were ‘almost endemic’ within ClearView Direct’s sales process for a number of years.[12]
Further, ClearView did not take meaningful steps to address defects in its quality assurance processes after becoming aware that they were ineffective.[13] Despite having decided to address the deficiencies in the quality assurance processes by moving towards monitoring 100% of sales calls, ClearView did not execute that decision, because it decided to commence shutting down its Direct sales business.[14] As a consequence, problematic sales practices appear to have continued for almost a year.[15]
I would attribute ClearView’s conduct to its culture and governance practices, its risk management practices, and its remuneration practices.
There was a culture within Clearview Direct that tolerated aggressive sales tactics at the cost of compliance,[16] and the management of ClearView Direct did not treat compliance issues, such as the breaches of the anti-hawking provisions, as matters that required escalation and consideration.[17]
The quality assurance program within ClearView Direct was seriously inadequate.[18] Its staff lacked qualifications, experience, supervision and resources.[19]
Finally, the remuneration and incentive structures within ClearView Direct encouraged sales agents to make as many sales as possible. This they did, sometimes at the expense of the customers’ best interests.[20]
The most telling general point to emerge from the case study was Mr Martin’s frank acknowledgment that he found it difficult to see how it would be possible to sell life insurance in outbound sales calls in a way that is both financially viable and legally compliant.[21] As he rightly said, it is difficult to see how a customer can come to a view in a phone call that lasts 20 minutes about ‘a fairly complex sort of area of financial services’.[22]
[1]Transcript, Gregory Martin, 10 September 2018, 5343.
[2]ClearView, Module 6 Case Study Submission, 4 [11].
[3]ClearView, Module 6 Case Study Submission, 4 [13].
[4]Transcript, Gregory Martin, 11 September 2018, 5401.
[5]Transcript, Gregory Martin, 11 September 2018, 5401.
[6]Transcript, Gregory Martin, 11 September 2018, 5401.
[7]Transcript, Gregory Martin, 11 September 2018, 5401.
[8]Transcript, Gregory Martin, 11 September 2018, 5387, 5389.
[9]Transcript, Gregory Martin, 11 September 2018, 5401.
[10]Transcript, Gregory Martin, 11 September 2018, 5402.
[11]Transcript, Gregory Martin, 11 September 2018, 5402.
[12]Transcript, Gregory Martin, 10 September 2018, 5358.
[13]Transcript, Gregory Martin, 11 September 2018, 5392–3.
[14]Transcript, Gregory Martin, 11 September 2018, 5393.
[15]Transcript, Gregory Martin, 11 September 2018, 5392–3.
[16]Transcript, Gregory Martin, 10 September 2018, 5359.
[17]Transcript, Gregory Martin, 10 September 2018, 5345.
[18]Transcript, Gregory Martin, 10 September 2018, 5358.
[19]Transcript, Gregory Martin, 11 September 2018, 5396–7.
[20]Transcript, Gregory Martin, 11 September 2018, 5402.
[21]Transcript, Gregory Martin, 11 September 2018, 5402.
[22]Transcript, Gregory Martin, 11September 2018, 5402.