Freedom Insurance Group will offload its administration and financial advice businesses, and eventually cease operations.
Freedom told the ASX this morning that it agreed in principle to sell its policy administration business to a third party for $5 million.
It will not disclose the service provider's name before entering into the underlying agreement.
The payment will go towards paying administration costs and remediating customers who have "suffered financial detriment," it said.
Proceeds from the transfer of the admin business will be used to "pay creditors, wind down remaining operations and meet any final regulatory obligations."
The board said it continued to explore a range of alternatives that will allow it to maintain its admin business, including its rights to trail commissions.
But increased lapse rates have adversely affected net trail commissions and admin income and therefore "diminished the options available to Freedom."
Based on the alternatives available, the board found that transitioning the admin business is in the best interest of shareholders.
After transferring the admin business, it intends to offload Sydney-based financial advice firm Spectrum Wealth Management, after which it would have exited all operations.
Furthermore, Freedom flagged it will have "exited all its operating businesses" after divesting Spectrum Wealth.
It will then focus on finalising regulatory obligation and consider the best method to return excess funds to shareholders.
The embattled firm announced in December 2018 that it will stop selling life insurance products and alerted shareholders of the likelihood it will face a liquidity crisis in 2019.
It missed its FY19 interim results deadline and was "unable to provide an accurate estimate of when the review will be completed."
Freedom came under fire during the financial services Royal Commission for selling a life insurance policy to an intellectually disabled man.