2.2 Evidence

2.2.1Mr Stewart’s son

Mr Stewart’s son was born with Down syndrome.[1] While Mr Stewart’s son has a degree of independence,[2] he has difficulties understanding whether a product isexpensive or cheap, and whether he has enough money to make purchases.[3] As a result, Mr Stewart and his wife assist their son to manage his finances.[4] In 2016, when Freedom sold Mr Stewart’s son an insurance policy, his only source of income was the Disability Support Pension.[5]

Mr Stewart learnt that his son had taken out insurance after his son received a letter from Freedom.[6] The letter said that Mr Stewart’s son had taken out a Freedom Protection Plan, which comprised three types of cover: funeral, accidental death and accidental injury.[7] The letter said that premiums for the funeral cover would not be due for 12 months, but that premiums for the accidental death and accidental injury cover would be due 12 days later.[8]

Mr Stewart wasflummoxedby the letter.[9] He did not understand how or why his son had been signed up, so he asked his son what had happened.[10] Mr Stewart’s son remembered speaking to someone on the phone, and providing that person with his debit card details, but could not explain why he had done so.[11] Mr Stewart did not think that his son understood that he had provided those details in order to purchase an insurance policy.[12]

The following day, Mr Stewart telephoned Freedom and attempted to cancel the policy on his son’s behalf.[13] Mr Stewart was not able to do this. Instead, a Freedom representative told Mr Stewart that they would listen to a recording of the call in which Mr Stewart’s son was sold the policy and then call Mr Stewart back.[14] The representative also told Mr Stewart that the sales agent who sold his son the policy probably did not know that his son had a disability.[15]

Mr Stewart did not receive a call back from Freedom, and did not receive any response to an email that he sent to Freedom’s Head of Operations lodging a formal complaint.[16] Two days later, Mr Stewart telephoned Freedom again.[17]

During this second phone call to Freedom, Mr Stewart and his son were transferred to Freedom’s Retention team, a group within Freedom whose chief task was to dissuade customers from cancelling their policies.[18] A Freedom retention agent that they spoke with tried to explain the potential benefits of the policy for Mr Stewart’s son, and emphasised several times that the policy was free for the first 12 months.[19] The retention agent also said that there was no reason for Freedom to have known that Mr Stewart’s son had a disability.[20] However, the retention agent ultimately agreed to cancel the policy.[21] Mr Stewart’s son was asked to confirm that he wished toterminate the policy.[22] Mr Stewart’s son had difficulty articulating those words.[23]

After the phone call, the retention agent engaged in an instant messenger conversation with another Freedom representative, in which disparaging remarks were made about Mr Stewart and his son.[24] Mr Orton accepted that this conduct wastotally inappropriate.[25]

During the call in which the policy was cancelled, Mr Stewart asked Freedom to provide him with copies of the recordings of the sales calls with his son.[26] Mr Stewart did not receive these recordings until August 2018, shortly before the Commission was to take evidence about the matter.[27]

Excerpts of two of these calls were played in the course of Mr Stewart’s evidence. In the first call, which lasted for just over two minutes, a Freedom sales agent asked Mr Stewart’s son whether his mother was at home, and discontinued the call when he determined that she was not.[28] In the second call, which took place two days later and which lasted for eighteen and a half minutes, the same sales agent sold the policy to Mr Stewart’s son.[29] Mr Stewart told the Commission that, having listened to that call, he did not think that his son had any understanding of what he was signing up for.[30] I agree. Mr Orton accepted that the sales agent’s actions were inappropriate, and that he should have known that Mr Stewart’s son was not capable of understanding what was occurring during the call.[31] Mr Orton agreed that the sales agent who sold the policy to Mr Stewart’s son had engaged indeeply troubling conduct.[32] Again, I agree.

2.2.2Selling to vulnerable consumers

In a submission provided to the Commission in August, Freedom acknowledged that it had engaged in misconduct and conduct that fell below community standards and expectations in respect of its treatment of at least six other vulnerable consumers.[33] These instances related to conduct both before and after the introduction of Freedom’s vulnerable customer training in February 2017.[34] The most recent complaint was received by Freedom in late April 2018.[35]

On 7 September 2018, in the week before Mr Orton was due to give evidence, Freedom filed a breach report with ASIC that related, in part, to the complaints that Freedom had received in relation to its treatment of vulnerable consumers.[36] Freedom told ASIC that when taken together, the conduct of its sales agents in connection with these sales may have breached sections 912A(1)(a), 912A(1)(ca) or 912A(1)(f) of the Corporations Act, which require Freedom to do all things necessary to ensure that the financial services covered by its Australian financial services licence are provided efficiently, honestly and fairly, to take reasonable steps to ensure that its representatives comply with financial services laws, and to ensure that its representatives are adequately trained, and are competent, to provide financial services.[37]

When asked about the causes of these problems, Mr Orton referred to a history of insufficient quality assurance coverage for calls made by Freedom Insurance representatives.[38] The breach report filed by ASIC also linked Freedom’s remuneration structures with its misselling to vulnerable consumers, a topic to which I will return.[39]

2.2.3Accidental death and accidental injury policies

Before turning to those matters, I make some observations about Freedom’s sale of accidental death and accidental injury products. As I previously indicated, on the day before Mr Orton gave evidence, Freedom told the Commission that it had ceased the outbound sale of those products.[40] However, the products will still be sold on Freedom’s website, and will still be offered to customers if they request them.[41]

In the statement that he provided to the Commission, Mr Orton suggested thataccidental death cover, combined with an accidental injury rider, provides a relatively low cost alternative insurance benefit to full life cover.[42] However, in his oral evidence, Mr Orton conceded that those types of cover were not atrue alternativeto life cover,[43] because the circumstances in which a person could make a claim on those policies were much more limited than under a life insurance policy.[44]

Despite this, Freedom engaged indowngradingsales practices in relation to accidental death policies, by offering the product to customers who failed to qualify for life cover.[45] Mr Orton accepted this practice should not occur.[46] Freedom also offered an accidental death policy to policyholders who attempted to cancel their existing life insurance policy.[47] Mr Orton accepted that the instructions given to its retention agents in this regard were notappropriate, and that selling the product in this context carried with it a risk that customers would be confused about the type of policy that they were getting.[48]

Mr Orton also conceded that Freedom’s sales processes for accidental death policies were deficient, because the sales scripts failed to notify customers of the narrow definition ofaccidentor the key exclusions from these policies.[49] Mr Orton accepted that as a result, policyholders could be confused about what their policies covered.[50]

Until it stopped outbound sales of its accidental death product, Freedom sold significant numbers of accidental death policies around 19,000 policies in 2016 and around 21,000 in 2017.[51] Despite this, at the time of the hearings, Freedom had consistently received only a very small number of claims no more than 22 in any of the last three years.[52]

2.2.4Remuneration and incentives

Between 2013 and 2015, Freedom used a volume-based commission structure.[53] In about 2015, Freedom began introducing variants to this model.[54] Amongst other things, Freedom introduced requirements that sales agents cover theirseat cost, and the cost of their leads, before they would be eligible to earn commission.[55] Mr Orton conceded that this increased the possibility that sales agents would engage in aggressive sales tactics.[56] More broadly, Mr Orton recognised that Freedom’s commission structure over recent years had created a situation in which sales agents had been incentivised to pursue sales aggressively.[57]

In the breach notification that it provided to ASIC on 7 September 2018, Freedom notified ASIC that between 1 January 2018 and May 2018, the variable component of its sales agent remuneration arrangements may have breached section 963E of the Corporations Act, which prohibits Australian financial services licence holders accepting conflicted remuneration.[58] Freedom informed ASIC that from 1 October 2018, no commission-based incentives would be paid to Freedom’s sales teams.[59] Mr Orton told the Commission that this was because of concerns that commissions may inappropriately influence the conduct of sales agents:[60] in Mr Orton’s words,any commission payable [to] a sales agent has the potential to be conflicted.[61]

Mr Orton also gave evidence about various incentive programs for sales agents, including non-monetary incentive programs, which had been run by Freedom over recent years. A number of these incentive programs were based solely on sales made by a sales agent, without any qualifying quality assurance requirement.[62] Mr Orton accepted that these incentive programs, particularly the higher value incentive programs, encouraged conflicted conduct by sales agents, and that this risk was heightened where no quality assurance qualifications were placed upon participation.[63] In its September 2018 breach notification to ASIC, Freedom also told ASIC that it considered that certain incentive programs run between January and April 2018 constitutedconflicted remuneration, in breach of section 963E of the Corporations Act.[64]

2.2.5Quality assurance and disciplinary processes

Mr Orton acknowledged that Freedom’s quality assurance monitoring processes had been inadequate.[65] The evidence indicated that Freedom’s guidelines formarkinga sales call for quality assurance purposes were insufficiently robust.[66] For example, at the time Mr Stewart’s son was sold his insurance, a sales call would not be marked as afail’ even if the representative demonstrated many instances of misleading, deceptive, false or incomplete information.[67] Many similar deficiencies persisted in the call marking guidelines until July 2018. Mr Orton conceded that the marking guidelines should have been strengthened earlier.[68]

The Commission also heard evidence about Freedom’s ineffective disciplinary practices, including the actions taken in respect of the sales agent who sold the policy to Mr Stewart’s son. The sales agent had received an initial written warning in January 2016, and afinal written warningin February 2016.[69] In the following months, additional concerns were raised about the sales agent’s practices.[70] For the most part, these warnings and concerns were not referred to in the fortnightly feedback that Freedom provided to the sales agent: rather, the sales agent’s supervisor continued to encourage him toaim bigand sell more policies.[71] Mr Orton conceded that the disciplinary processes in place at this time did not adequately respond to misconduct by representatives,[72] and that there were broad problems in the feedback loop used by Freedom Insurance to monitor and address such instances of misconduct.[73]

2.2.6Retention strategies

In its submission to the Commission, Freedom acknowledged approximately 27 instances of conduct in relation to Freedom’s retention processes that fell below community standards and expectations.[74] The vast majority of instances related to complaints received since the start of February 2018.[75] Mr Orton accepted that Freedom’s retention processes had been too strong,[76] and that Freedom had at times made ittoo difficult to cancel [policies].[77] Information provided by Freedom to ASIC indicated that over a 12month period, Freedom had received an average of 72 cancellation requests a day,[78] and that policyholders had only succeeded in cancelling their policies in 28.5% of calls made to Freedom.[79]

The Commission also heard about various retention marketing campaigns run by Freedom, including as recently as July 2018.[80] The retention campaigns were directed to dissuading policyholders from cancelling their policies, or getting them to reinstate cancelled policies.[81] Mr Orton conceded that these campaigns were designed to make it as difficult as possible for people to cancel their policies, and to win policyholders back after they had cancelled.[82] Mr Orton said that these campaigns should not have been initiated, and that Freedom would stop running campaigns of this nature.[83]


[1] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 1–2 [5]; Transcript, Bruce Stewart, 11 September 2018, 5406.

[2] Transcript, Bruce Stewart, 11 September 2018, 5407.

[3] Transcript, Bruce Stewart, 11 September 2018, 5407.

[4] Transcript, Bruce Stewart, 11 September 2018, 5407.

[5] Transcript, Bruce Stewart, 11 September 2018, 5407.

[6] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 2 [9]–[10]; Transcript, Bruce Stewart, 11 September 2018, 5408.

[7] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-1 [FIG.0001.0001.0057 at .0059]; Transcript, Bruce Stewart, 11 September 2018, 5408.

[8] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-1 [FIG.0001.0001.0057 at .0057]; Transcript, Bruce Stewart, 11 September 2018, 5408.

[9] Transcript, Bruce Stewart, 11 September 2018, 5408.

[10] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 3 [14]; Transcript, Bruce Stewart, 11 September 2018, 5408.

[11] Transcript, Bruce Stewart, 11 September 2018, 54089.

[12] Transcript, Bruce Stewart, 11 September 2018, 54089.

[13] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 4 [15]; Transcript, Bruce Stewart, 11 September 2018, 5409.

[14] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 4 [17]; Transcript, Bruce Stewart, 11 September 2018, 5409.

[15] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-2 [FIG.0001.0001.0060]; Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-3 [FIG.0001.0001.0258 at .0259]; Transcript, Craig Orton, 12 September 2018, 5512.

[16] Transcript, Bruce Stewart, 11 September 2018, 541011.

[17] Transcript, Bruce Stewart, 11 September 2018, 5411.

[18] Transcript, Bruce Stewart, 11 September 2018, 5412; Transcript, Craig Orton, 11 September 2018, 5435.

[19] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 5 [24]; Transcript, Bruce Stewart, 11 September 2018, 5412.

[20] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-6 [FIG.0001.0001.0261 at .0264].

[21] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 5 [22].

[22] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-6 [FIG.0001.0001.0261 at .0266].

[23] Transcript, Craig Orton, 11 September 2018, 5413.

[24] Transcript, Bruce Stewart, 11 September 2018, 5415–16; Transcript, Craig Orton, 12 September 2018, 5517.

[25] Transcript, Craig Orton, 12 September 2018, 5517.

[26] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-6 [FIG.0001.0001.0261 at .0265].

[27] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, 67 [30]–[35].

[28] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-15 [FIG.0001.0001.0002].

[29] Exhibit 6.64, Witness statement of Bruce Stewart, 4 September 2018, Exhibit BGS-17 [FIG.0001.0001.0003].

[30] Transcript, Bruce Stewart, 11 September 2018, 5417.

[31] Transcript, Craig Orton, 11 September 2018, 5446.

[32] Transcript, Craig Orton, 11 September 2018, 5446.

[33] Transcript, Craig Orton, 11 September 2018, 5448–50; see also Exhibit 6.72, Freedom’s Response to Commission Request of 3 August 2018.

[34] Transcript, Craig Orton, 11 September 2018, 5449–50.

[35] Transcript, Craig Orton, 11 September 2018, 5450.

[36] Exhibit 6.74, 7 September 2018, Freedom Breach Notice.

[37] Exhibit 6.74, 7 September 2018, Freedom Breach Notice, 34.

[38] Transcript, Craig Orton, 11 September 2018, 5451.

[39] Exhibit 6.74, 7 September 2018, Freedom Breach Notice, 5; Transcript, Craig Orton, 11 September 2018, 5453.

[40] Transcript, Craig Orton, 11 September 2018, 5423.

[41] Transcript, Craig Orton, 11 September 2018, 5431–2.

[42] Exhibit 6.67, Witness statement of Craig Orton, 27 August 2018, 20 [57].

[43] Transcript, Craig Orton, 11 September 2018, 5432.

[44] Transcript, Craig Orton, 11 September 2018, 5432.

[45] Transcript, Craig Orton, 11 September 2018, 54346.

[46] Transcript, Craig Orton, 11 September 2018, 54345.

[47] Transcript, Craig Orton, 11 September 2018, 54356.

[48] Transcript, Craig Orton, 11 September 2018, 5436; see also Freedom Insurance Group Ltd, Module 6 Case Study Submission, 3 [12].

[49] Transcript, Craig Orton, 11 September 2018, 54434.

[50] Transcript, Craig Orton, 11 September 2018, 5444.

[51] Transcript, Craig Orton, 11 September 2018, 5439.

[52] Transcript, Craig Orton, 11 September 2018, 5440.

[53] Transcript, Craig Orton, 11 September 2018, 5454.

[54] Transcript, Craig Orton, 11 September 2018, 5455.

[55] Transcript, Craig Orton, 11 September 2018, 5456.

[56] Transcript, Craig Orton, 11 September 2018, 5457.

[57] Transcript, Craig Orton, 11 September 2018, 5463.

[58] Exhibit 6.74, 7 September 2018, Freedom Breach Notice, 23.

[59] Exhibit 6.74, 7 September 2018, Freedom Breach Notice, 3.

[60] Transcript, Craig Orton, 11 September 2018, 5464–5.

[61] Transcript, Craig Orton, 11 September 2018, 5454.

[62] Transcript, Craig Orton, 11 September 2018, 5467; cf Freedom Insurance Group Ltd, Module 6 Case Study Submission, 6 [33].

[63] Transcript, Craig Orton, 11 September 2018, 5471.

[64] Exhibit 6.74, 7 September 2018, Freedom Breach Notice, 2.

[65] Transcript, Craig Orton, 11 September 2018, 5473.

[66] See, eg, Transcript, Craig Orton, 11 September 2018, 54746; cf Freedom Insurance Group Ltd, Module 6 Case Study Submission, 3 [13].

[67] Transcript, Craig Orton, 11 September 2018, 5475.

[68] Transcript, Craig Orton, 11 September 2018, 5479.

[69] Exhibit 6.86, 28 January 2016, First Written Warning; Exhibit 6.87, 16 February 2016, Final Warning.

[70] Exhibit 6.89, 2 March 2016, Email Concerning Call Converted; Exhibit 6.91, 6 April 2016, Email from Bryan Reilly; Transcript, Craig Orton, 11 September 2018, 5489.

[71] Exhibit 6.88, 16 February 2016, Freedom Insurance Fortnightly 121.

[72] Transcript, Craig Orton, 11 September 2018, 5481.

[73] Transcript, Craig Orton, 11 September 2018, 5493.

[74] Transcript, Craig Orton, 12 September 2018, 5508.

[75] Transcript, Craig Orton, 12 September 2018, 5508.

[76] Transcript, Craig Orton, 12 September 2018, 55089.

[77] Transcript, Craig Orton, 12 September 2018, 5505.

[78] Transcript, Craig Orton, 12 September 2018, 5501.

[79] Transcript, Craig Orton, 12 September 2018, 5502.

[80] Exhibit 6.100, 3 July 2018, Retention Marketing Campaign; Transcript, Craig Orton, 12 September 2018, 55202.

[81] Transcript, Craig Orton, 12 September 2018, 5518–19.

[82] Transcript, Craig Orton, 12 September 2018, 5522–3.

[83] Transcript, Craig Orton, 12 September 2018, 55223.

70 thoughts on “2.2 Evidence”

  1. Pingback: stromectol goodrx
  2. Pingback: ic stromectol 6 mg
  3. Pingback: priligy 30mg price
  4. Pingback: ivermectin generic
  5. Pingback: cialis price
  6. Pingback: Online
  7. Pingback: stromectol tab 3mg
  8. Pingback: tadalafil goodrx
  9. Pingback: ivermectin usa
  10. Pingback: generic cialis
  11. Pingback: tadalafil tablet
  12. Pingback: mylan tadalafil
  13. Pingback: cialis price
  14. Pingback: play casino online
  15. Pingback: stromectol msd
  16. Pingback: ivermectin us fda
  17. Pingback: ivermectin 10 ml
  18. Pingback: india ivermectin
  19. Pingback: ivermectin pills
  20. Pingback: ivermectin tablet

Feedback