8.3 What the case study showed

Mr Bessell accepted that consumers were sold products that were of questionable or little value to them, and that the products could have been better explained by the dealers.[1] Mr Bessell agreed that the number and complexity of the products presented to the consumer, and the various options within the products, made it difficult for consumers to have a proper understanding of the products.[2]

8.3.1Misconduct

In closing submissions, Counsel Assisting submitted that it was open to me to find that Swann may have engaged in misconduct by breaching the obligation in section 912A(1)(a) of the Corporations Act (in a number of distinct ways), the obligation in section 912A(1)(ca) of the Corporations Act, the obligation in section 912A(1)(aa) and the obligation in section 145 of the National Credit Code. In its written submissions, IAG resisted any finding of misconduct being made.[3]

Section 912A(1)(a)

Section 912A(1)(a) obliges Swann to do all things necessary to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly. Counsel Assisting submitted there were four matters that demonstrated that Swann’s conduct may have breached that provision. The first was that Swann undertook no meaningful review of its products to determine whether they provided any value to customers.[4] The second was that Swann continued to authorise the sale of those products after becoming aware that ASIC held concerns about their product design and sales practices.[5] The third was that Swann established and maintained arrangements that incentivised dealers to sell as many addon products to consumers as possible, regardless of the suitability or value to consumers.[6] The final basis was that Swann failed to establish systems to oversee and monitor the sales practices of its authorised representatives.[7]

I deal with each of the four matters in turn.

Swann undertook no meaningful review of its products to determine whether they provided any value to customers.[8] In its submissions, IAG pointed to internal reviews of loan protection insurance and GAP products in July and August 2016. But those reviews came at least eight months after ASIC had raised its concerns with Swann that Swann’s products may have contravened regulatory requirements. As at July 2016, Swann had not undertaken adeep technical review of all the products distributed by Swann through Motor Dealers.[9] Indeed, Swann’s view was thatASIC’s review of the [motor dealer] channel and products will highlight any issues in respect of product design negating the need for a further internal review.[10] Mr Bessell agreed that this was the position.[11]

Swann continued to authorise the sale of those products after becoming aware that ASIC held concerns about their product design and sales practices.[12] IAG noted that after ASIC raised its concerns, Swann participated in an industry approach to the issue through the Insurance Council of Australia.[13] It stated that[w]hile with the benefit of hindsight, reasonable minds could differ as to what approach Swann could or should have taken in and after September 2015, it is difficult to see that becoming involved in an industry wide solution through the Insurance Council of Australia was inefficient or unfair (let alone dishonest).[14]

There are two problems with this submission.

The first is that, as Mr Bessell recognised in his witness statement, the pursuit of an industry solution through the Insurance Council of Australia delayed Swann dealing directly with the issues in its own business.[15] This approach by Swann, in circumstances where Swann lacked an understanding from (relevantly) September 2015 of the value of its products, does not point toward conduct consistent with the obligation imposed by section 912A(1)(a).

The second is that the submission seeks, impermissibly, to qualify Swann’s statutory obligation in section 912A(1)(a). As IAG accepted, Swann continued to sell the products after ASIC raised its concerns in September 2015.[16] Swann possessed all information necessary to ascertain those issues before ASIC’s work. Upon becoming aware of ASIC’s concerns, there were many options open to Swann to reduce the detriment to consumers. It took only one option, and that option was inadequate to ensure that the sale of the add-on insurance products was efficient, honest and fair.

The third matter referred to by Counsel Assisting was that Swann established and maintained arrangements that incentivised dealers to sell as many addon products to consumers as possible, regardless of the suitability or value to consumers.[17] In its submissions, IAG again pointed to the Insurance Council of Australia’s attempts to develop an industrywide solution.[18] No doubt the market position made unilateral action difficult. But market-wide misconduct cannot condition the statutory obligation. Compliance with the law will sometimes require entities to sacrifice revenue or profit, if that revenue or profit cannot be generated in a lawful way.

The final matter was that Swann failed to establish systems to oversee and monitor the sales practices of its authorised representatives.[19] IAG pointed to the systems that it did have in place, presumably to suggest that they were adequate.[20] That submission is at odds with Mr Bessell’s acceptance that, at least between 2013 and January 2017, Swann did not have in place adequate risk management systems.[21] Given the significance of add-on insurance sales to Swann’s total revenue, the sales practices of its authorised representatives was necessarily a significant risk. IAG’s own internal report noted that theauthorised representatives currently are not actively recording potential breaches and, therefore, Swann has no oversight on any issues that may be occurring. Promoting the importance of logging all potential breaches is required.[22]

In combination, the four matters identified above are sufficient to find that Swann may have engaged in misconduct by breaching its obligation to do all things necessary to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly. Selling products through a heavily incentivised dealer network, as an add-on to another sale, creates very significant risk of unfairness for consumers. Doing so in circumstances where the conduct of the authorised representatives is not actively monitored and/or audited heightens the risk that the statutory standard of conduct will not be met. When the products are of low value, the risk of unfairness is compounded. And while industry-wide solutions will often be appropriate, participation through an industry group does not absolve a participating entity of its continuing legal obligations.

Section 912A(1)(ca)

IAG also resisted a finding that Swann may have breached its obligation under section 912A(1)(ca) of the Corporations Act the requirement to take reasonable steps to ensure that its representatives complied with financial services laws by failing to establish systems to oversee and monitor the sales practices of Swann’s authorised representatives.[23] The matters I have mentioned already show that Swann may have breached this obligation.

Section 912A(1)(aa)

IAG did not accept that Swann may have breached section 912A(1)(aa) of the Corporations Act by failing to have in place adequate arrangements for the management of any conflicts of interest that arose through incentivising sales of its add-on insurance products.[24]

IAG sought to rely on the processes that may have been insufficient to prevent Swann from breaching its obligations under section 912A(1)(a) and (ca) to say that its processes for managing conflicts were adequate.[25] The processes relied on operated together with Swann’s remuneration and incentive arrangements for its authorised representatives. Those arrangements were, by design, focused solely on sales volumes. The arrangements did not incentivise or promote appropriate sales; indeed, they encouraged the inappropriate conduct that has led to the remediation program. Mr Bessell accepted that the point of Swann’s remuneration and incentive arrangements was to incentivise sales.[26] He accepted that, on occasion, these incentive programs incentivised inappropriate sales practices, and that Swann’s authorised representatives sold products that were not appropriate to the consumer.[27]

IAG did not explain how, in light of these remuneration arrangements, the initial training and electronic compliance questionnaire ensured conflicts would be managed. Indeed, even by January 2017, Swann had no knowledge of what issues may have been occurring. Swann’s authorised representatives were not actively recording potential breaches and there was no monitoring in place to ensure that refresher training was completed. No facetoface audits were being carried out. Swann’s electronic questionnaire was limited in the level of detail it captured.[28]

In these circumstances, I find that Swann may not have had in place adequate arrangements for the management of any conflicts of interest.

Exceeding commission cap

Finally, as IAG accepted in its 29 June 2018 letter, Swann may have breached section 145 of the National Credit Code by authorising payments to 34 authorised representatives that may have exceeded the 20% cap on commissions imposed under that section.[29]

8.3.2Conduct falling below community standards and expectations

Swann also engaged in conduct that fell below community standards and expectations by failing to take meaningful steps to ensure that its authorised representatives only sold add-on insurance products in circumstances where the product would be of value to the customer, by designing and implementing remuneration and incentive systems that promoted unfair sales practices; by failing to promote sales practices that focused on delivering value to customers and that met customer needs and expectations; by failing to investigate the appropriateness of its add-on insurance products or the sales practices of its authorised representatives in a timely manner; and by failing to redesign the add-on insurance products and the remuneration and incentive arrangements after first becoming aware of ASIC’s concerns in late 2013. Swann largely accepted that it had failed to meet community standards and expectations in those ways.[30]

8.3.3Causes of the conduct

Swann’s conduct had various causes. One was Swann’s remuneration and incentive arrangements for its authorised representatives. As I have noted above, those arrangements were, by design, focused solely on sales volumes.

The conduct was also attributable to Swann’s culture in various ways. Swann’s focus was profit and the maintenance of market share. Those were the goals pursued in the design of its remuneration and incentive arrangements, the prioritisation of the interests of motor dealers ahead of customers and the failure to design systems that properly supervised the work of the authorised representatives. Mr Bessell acknowledged that Swann viewed the motor dealers not the ultimate consumer as its customers.[31] In its initial submission to the Commission, IAG acknowledged that Swann’s focus on motor dealers was asignificant contributorto the conduct now the subject of the remediation program.[32]

Mr Bessell acknowledged that that there were two important features of the regulatory regime that facilitated the sale of add-on insurance: first, the point of sale exemption in the National Consumer Credit Protection Regulations 2010 (Cth), relevant to consumer credit insurance products; and second, the ability for Australian financial services licensees to authorise representatives to provide general advice.[33] Mr Bessell acknowledged that some industry participants considered it inappropriate for authorised representatives to determine whether an add-on insurance policy was suitable for the customer, in circumstances where authorised representatives were authorised to provide general advice only.[34]


[1] Transcript, Benjamin Bessell, 19 September 2018, 61401.

[2] Transcript, Benjamin Bessell, 18 September 2018, 6086.

[3] IAG, Module 6 Case Study Submission, 211 [6]–[55].

[4] Transcript, Closing Submissions, 21 September 2018, 6503.

[5] Transcript, Closing Submissions, 21 September 2018, 6503.

[6] Transcript, Closing Submissions, 21 September 2018, 6503.

[7] Transcript, Closing Submissions, 21 September 2018, 6503–4.

[8] Transcript, Closing Submissions, 21 September 2018, 6503.

[9] Exhibit 6.314, 27 July 2016, Report of IAG Risk Committee Review of CCI and Add-On Insurance, 9.

[10] Exhibit 6.314, 27 July 2016, Report of IAG Risk Committee Review of CCI and Add-On Insurance, 9.

[11] Transcript, Benjamin Bessell, 19 September 2018, 6134.

[12] Transcript, Closing Submissions, 21 September 2018, 6503.

[13] IAG, Module 6 Case Study Submission, 3 [12].

[14] IAG, Module 6 Case Study Submission, 3 [12].

[15] Exhibit 6.304, Witness statement of Benjamin Bessell, 27 August 2018, 18 [105(e)].

[16] IAG, Module 6 Case Study Submission, 3 [12].

[17] Transcript, Closing Submissions, 21 September 2018, 65034.

[18] IAG, Module 6 Case Study Submission, 4 [16].

[19] Transcript, Closing Submissions, 21 September 2018, 6504.

[20] IAG, Module 6 Case Study Submission, 56 [17]–[26].

[21] Transcript, Benjamin Bessell, 19 September 2018, 6121.

[22] Exhibit 6.312, 9 January 2017, Oversight Report of Swann Authorised Representatives.

[23] IAG, Module 6 Case Study Submission, 67 [27]–[29]; see also Transcript, Closing Submissions, 21 September 2018, 6504.

[24] IAG, Module 6 Case Study Submission, 7 [30].

[25] IAG, Module 6 Case Study Submission, 7 [31].

[26] Transcript, Benjamin Bessell, 18 September 2018, 6105.

[27] Transcript, Benjamin Bessell, 18 September 2018, 6106.

[28] Exhibit 6.312, 9 January 2017, Oversight of Swann Authorised Representatives Report, 3; Transcript, Benjamin Bessell, 18 September 2018, 6114–15.

[29] Transcript, Benjamin Bessell, 19 September 2018, 6112.

[30] IAG, Module 6 Case Study Submission, 89 [37]–[47].

[31] Exhibit 6.304, Witness statement of Benjamin Bessell, 27 August 2018, 18 [105(b)].

[32] IAG, Initial Submissions, 29 January 2018, 33 [Item 73].

[33] Transcript, Benjamin Bessell, 18 September 2018, 60834.

[34] Transcript, Benjamin Bessell, 19 September 2018, 6144.

780 thoughts on “8.3 What the case study showed”

  1. Pingback: Sonia Randhawa
  2. Pingback: Sonia Randhawa
  3. Pingback: cbd for pain
  4. Pingback: Sonia Randhawa
  5. Pingback: Sonia Randhawa
  6. Pingback: Sonia Randhawa
  7. Pingback: 5euros
  8. Pingback: Courses
  9. Pingback: Handlateknik
  10. Pingback: غرور
  11. Pingback: الغدر
  12. Pingback: حزن
  13. Pingback: 5euros
  14. Pingback: RoyalCBD.com
  15. Pingback: RoyalCBD
  16. Pingback: RoyalCBD
  17. Pingback: terpenes
  18. Pingback: cbd oil cost
  19. Pingback: RoyalCBD.com
  20. Pingback: RoyalCBD.com
  21. Pingback: RoyalCBD
  22. Pingback: Royal CBD
  23. Pingback: RoyalCBD.com
  24. Pingback: wisconsin
  25. Pingback: RoyalCBD.com
  26. Pingback: Royal CBD
  27. Pingback: cbd vermont
  28. Pingback: RoyalCBD.com
  29. Pingback: Royal CBD
  30. Pingback: cbd oil tennessee
  31. Pingback: Royal CBD
  32. Pingback: cbd ohio
  33. Pingback: Royal CBD
  34. Pingback: cbd pennsylvania
  35. Pingback: RoyalCBD
  36. Pingback: new york
  37. Pingback: RoyalCBD
  38. Pingback: cbd oil new jersey
  39. Pingback: Royal CBD
  40. Pingback: RoyalCBD
  41. Pingback: cbd mississippi
  42. Pingback: missouri cbd
  43. Pingback: RoyalCBD.com
  44. Pingback: RoyalCBD
  45. Pingback: RoyalCBD.com
  46. Pingback: maryland cbd
  47. Pingback: Royal CBD
  48. Pingback: maine cbd
  49. Pingback: Royal CBD
  50. Pingback: Royal CBD
  51. Pingback: Royal CBD
  52. Pingback: colorado cbd
  53. Pingback: cbd oil california
  54. Pingback: cbd oil arizona
  55. Pingback: Royal CBD
  56. Pingback: RoyalCBD.com
  57. Pingback: Royal CBD
  58. Pingback: RoyalCBD.com
  59. Pingback: RoyalCBD.com
  60. Pingback: embedded system
  61. Pingback: oyo hotels pune
  62. Pingback: Buy weed online
  63. Pingback: Exotic Carts
  64. Pingback: Pc hilfe rüti
  65. Pingback: basset hound
  66. Pingback: Buy LSD Online
  67. Pingback: اغاني
  68. Pingback: Venice photography
  69. Pingback: Employee benefits
  70. Pingback: Employee benefits
  71. Pingback: Thailand Grown
  72. Pingback: cannabis4homes.com
  73. Pingback: big dildo
  74. Pingback: internet radio
  75. Pingback: gamdom
  76. Pingback: Semilac uk
  77. Pingback: bitsler
  78. Pingback: stake
  79. Pingback: wolfbet
  80. Pingback: Mt. Kenya
  81. Pingback: Working Capital
  82. Pingback: Financial career
  83. Pingback: Visa
  84. Pingback: crypto trade
  85. Pingback: Denver SEO expert
  86. Pingback: home bartender
  87. Pingback: it asset disposal
  88. Pingback: crypto tron
  89. Pingback: Puppies near me
  90. Pingback: THC VAPE JUICE
  91. Pingback: sex positivity
  92. Pingback: find a builder
  93. Pingback: dinh cu canada
  94. Pingback: rodos feribot
  95. Pingback: hat macca
  96. Pingback: emma-shop
  97. Pingback: blogcaodep.com
  98. Pingback: Damiana
  99. Pingback: cell phone
  100. Pingback: mana mana youtube
  101. Pingback: buy cbd online
  102. Pingback: tabakvervanger
  103. Pingback: Solar Studio
  104. Pingback: Tierfutter
  105. Pingback: yout
  106. Pingback: sandalye
  107. Pingback: kamado grill 2020
  108. Pingback: sweetiehouse.vn
  109. Pingback: Buy cocaine online
  110. Pingback: Used guns
  111. Pingback: Gun Shops Near Me
  112. Pingback: Magic Mush Rooms
  113. Pingback: Blackberry Kush
  114. Pingback: hard sex video
  115. Pingback: Gulberg Heights
  116. Pingback: thc vape juice
  117. Pingback: sweat
  118. Pingback: popo kaldırma
  119. Pingback: penis ring
  120. Pingback: ekonomi haberleri
  121. Pingback: Reformhaus
  122. Pingback: find out more
  123. Pingback: Tenuate retard
  124. Pingback: canadian pharmacy
  125. Pingback: o-dsmt
  126. Pingback: Fish scale coke
  127. Pingback: Change DMT
  128. Pingback: College kenya
  129. Pingback: K2 spray for sale
  130. Pingback: Herbal Incense
  131. Pingback: Dank Cartridges
  132. Pingback: brazzers
  133. Pingback: canada pharmacy
  134. Pingback: film
  135. Pingback: pubg mobile hile
  136. Pingback: bitcoin wallet
  137. Pingback: CARGO LE HAVRE
  138. Pingback: bitcoin wallet
  139. Pingback: ed treatment
  140. Pingback: sugarglider
  141. Pingback: cockatoo for sale
  142. Pingback: toucan tongue
  143. Pingback: viagra last longer
  144. Pingback: write my paper
  145. Pingback: cheap cialis
  146. Pingback: does cialis work
  147. Pingback: cialis 5mg
  148. Pingback: roman viagra
  149. Pingback: viagra or cialis
  150. Pingback: goodrx viagra
  151. Pingback: mail order cialis
  152. Pingback: pharmacy
  153. Pingback: viagra
  154. Pingback: slipped viagra mom
  155. Pingback: l viagra sex
  156. Pingback: cialis uk online
  157. Pingback: cialis daily elily
  158. Pingback: what is zithromax
  159. Pingback: amoxicillin dosis
  160. Pingback: cialis soft tablet
  161. Pingback: occcvzex
  162. Pingback: ivermectin topical
  163. Pingback: ic doxycycline
  164. Pingback: priligy order us
  165. Pingback: neurontin epilepsy
  166. Pingback: paxil 30 mg
  167. Pingback: cialis 10 mg
  168. Pingback: buy viagra 50mg uk
  169. Pingback: mambo 36 tadalafil
  170. Pingback: propecia pill
  171. Pingback: 100mg viagra pill
  172. Pingback: propecia 5mga
  173. Pingback: cialis 20mg pills
  174. Pingback: mexican pharmacies
  175. Pingback: otc sildenafil cvs
  176. Pingback: 6 mg tadalafil
  177. Pingback: best otc ed pills
  178. Pingback: Zakhar Berkut
  179. Pingback: Floxin
  180. Pingback: buy online cheap
  181. Pingback: cialis 60 mg
  182. Pingback: cialis bathtubs
  183. Pingback: safe buy cialis
  184. Pingback: buy fildena online
  185. Pingback: cialis 100mg real
  186. Pingback: medications for ed
  187. Pingback: viagra dose
  188. Pingback: cialis capsule 5mg
  189. Pingback: cialis 50mg pills
  190. Pingback: viagra
  191. Pingback: neurontin 900 mg
  192. Pingback: cytotmeds.com
  193. Pingback: metoprolol 100 mg
  194. Pingback: levitra from usa
  195. Pingback: duloxetine
  196. Pingback: cymbalta 30mg
  197. Pingback: bupropion sr 100mg
  198. Pingback: buy buspar online
  199. Pingback: celexa medication
  200. Pingback: diclofenac patch
  201. Pingback: clonidine generic
  202. Pingback: coreg cost
  203. Pingback: best drug for ed
  204. Pingback: cialis expensive
  205. Pingback: viagra coupon
  206. Pingback: levitra buy online
  207. Pingback: buy stromectol
  208. Pingback: ivermectin usa
  209. Pingback: acyclovir 400 mg
  210. Pingback: donepezil 10 mg
  211. Pingback: cephalexin for uti
  212. Pingback: clindamycin dosing
  213. Pingback: erythromycin 250mg
  214. Pingback: azithromycin uses
  215. Pingback: viamedic cialis
  216. Pingback: watermelon viagra
  217. Pingback: buy vardenafil
  218. Pingback: vardenafil 10mg
  219. Pingback: otc viagra walmart
  220. Pingback: cialis daily uk
  221. Pingback: ed meds
  222. Pingback: viagra price
  223. Pingback: best otc viagra
  224. Pingback: soft viagra
  225. Pingback: viagra porn
  226. Pingback: norvasc 10 mg
  227. Pingback: daily cialis
  228. Pingback: cialis and alcohol
  229. Pingback: price of viagra
  230. Pingback: lasix 20 mg cost
  231. Pingback: xenical 120mg uk
  232. Pingback: zanaflex capsules
  233. Pingback: cialis india price
  234. Pingback: cialis europe
  235. Pingback: tadalafil price uk
  236. Pingback: real viagra 100mg
  237. Pingback: stendra vs viagra
  238. Pingback: cialis walmart
  239. Pingback: cialis mexico
  240. Pingback: viagra, depoxtine
  241. Pingback: canada viagra
  242. Pingback: regcialist.com
  243. Pingback: canadian pharmacy
  244. Pingback: ivermect
  245. Pingback: plaquenil 25 mg
  246. Pingback: norvasc pfizer
  247. Pingback: taking prilosec
  248. Pingback: seroquel xr dose
  249. Pingback: viagra samples
  250. Pingback: canada viagra
  251. Pingback: pills like cialis
  252. Pingback: lexapro wiki
  253. Pingback: cialis oral
  254. Pingback: sildenafil citrate
  255. Pingback: 1
  256. Pingback: generic for viagra
  257. Pingback: ivermect capsule
  258. Pingback: 75 mg viagra
  259. Pingback: viagra pills
  260. Pingback: cheap viagra
  261. Pingback: ivermectin 3mg
  262. Pingback: viagra online usa
  263. Pingback: generiac cialis
  264. Pingback: mail order cialis
  265. Pingback: ivermectin demodex
  266. Pingback: tadalafila
  267. Pingback: tadalafil cost
  268. Pingback: hcq 50 mg
  269. Pingback: sildenafil
  270. Pingback: ivermectin coupon
  271. Pingback: buy viagra
  272. Pingback: canadian drugs
  273. Pingback: bestellen viagra
  274. Pingback: buy viagra cheap
  275. Pingback: brand viagra
  276. Pingback: viagra naturel
  277. Pingback: 124 mg furosemide
  278. Pingback: purchase neurontin
  279. Pingback: gabapentin 1200 mg
  280. Pingback: whats viagra
  281. Pingback: avana usa
  282. Pingback: purchase modafinil
  283. Pingback: stromectol drug
  284. Pingback: albuterol buying
  285. Pingback: zithromax generic
  286. Pingback: viagra users group
  287. Pingback: cost for viagra
  288. Pingback: quineprox 75
  289. Pingback: prednisone 54
  290. Pingback: ivermectin buy uk
  291. Pingback: cost of albuterol
  292. Pingback: price for viagra
  293. Pingback: viagra generic
  294. Pingback: viagra tablet
  295. Pingback: pfizer viagra
  296. Pingback: viagra price
  297. Pingback: stromectol online
  298. Pingback: ivermectin buy nz
  299. Pingback: cialis blac
  300. Pingback: ivermectin 6
  301. Pingback: ed pills that work
  302. Pingback: women viagra
  303. Pingback: ivermectin 90 mg
  304. Pingback: Cialis Soft Tabs
  305. Pingback: free viagra
  306. Pingback: viagra cvs
  307. Pingback: que es cialis
  308. Pingback: is latisse safe
  309. Pingback: Sustiva
  310. Pingback: Motrin
  311. Pingback: molnupiravir oral
  312. Pingback: aralen 200
  313. Pingback: tamoxifen cream
  314. Pingback: aralen singapore
  315. Pingback: olumiant generic
  316. Pingback: tizanidine drug
  317. Pingback: cost of olumiant
  318. Pingback: buy ivermectin nz
  319. Pingback: molnupiravir
  320. Pingback: ivermectin
  321. Pingback: doxycycline hyc
  322. Pingback: ivermectin horse
  323. Pingback: cialis drug
  324. Pingback: cialis not working
  325. Pingback: buy clomid 25mg

Feedback