The financial services Royal Commission exposed more boiler room sales tactics of call centre staff selling life insurance which drove poor behaviour and a sales-driven culture, and effectively breached anti-hawking provisions.
Select AFSL managing director Russell Howden was in the hot seat again; this time explaining to the Commission why ASIC had reason to believe the firm engaged in misconduct selling life insurance similar to the way it sold funeral insurance.
An ASIC investigation of phone-based practices found Let's Insure, a subsidiary of Select AFSL, had three times more inappropriate life insurance sales tactics than the other firms under review. In one sample, ASIC deemed 19 out of 55 sales conducted by Let's Insure as inappropriate.
Sales staff were instructed to target two policy sales per day and have a dial utilisation time of 75%, meaning representatives had to be on the phone the majority of their working hours and not be "idle", Howden explained.
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The regulator said the deficiencies in some of Select AFSL's processes and procedures that focused on sales over the consumer were "pushy or aggressive" and undermined informed decision-making.
Sales representatives, for example, refused to send documentation requested by consumers to help them make a decision about a product.
"Unfortunately, at the time we didn't have the functionality to automatically generate a quote to email to the client. We now do have that functionality and it is provided to the client," Howden said.
Furthermore, ASIC highlighted the: "persistence in overcoming consumer objections, the speed with which calls were conducted, combined with the use of questions presented as statements that the consumer simply needs to agree to for the conversation to move on, and the use of inappropriate and pushy sales tactics such as staff firmly directing consumers to log on to their mobile phone banking apps while on the call to confirm their banking payment details."
Its next major concern was the high cancellation rates within the cooling off period, and lapses within the first 12 months, which it regarded as an indicator of poor consumer outcomes.
Howden added Select AFSL terminated its agreement to distribute and promote St Andrews funeral insurance products on 19 March 2018.
This was on the basis that the Life Insurance Framework that came to effect 1 January 2018 and it was not "commercially viable" for the partnership to continue, he said.
"Well, as set out in my response in my statement, changes to the remuneration and the life insurance remuneration arrangements means as a distributor we're no longer able to get upfront allowance of 100% or more to cover the policy acquisition costs," Howden told the Commission.
"Essentially, from 1 January we are what we call a level commission option. Commercially, we just don't have sufficient funding, if you want to call it, to support our policy acquisition process," he said.
Howden said it took two months to conclude that "no alternative model" could be agreed upon with St Andrews. The LIF reforms were introduced on 6 November 2015.