On Monday, the sixth round of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry kicked off with Clearview Wealth’s chief actuary & risk officer Gregory Martin in the witness box.
Counsel assisting Rowena Orr questioned Mr Martin about the life insurance provider’s move into direct sales in 2013 and the establishment of call centres in Melbourne and Parramatta, in Sydney’s west.
Mr Martin explained that almost immediately after setting up its Melbourne tele-sales centre, ClearView started experiencing difficulties with a spike in lapse rates and a worrying number of customers cancelling their policies.
By late 2015, the company was also having problems with its Parramatta call centre, prompting the company to change its strategy and “pivot to mid-market” customers, rather than those in “low socio-economic bands”, the commission heard.
“You were going to move to a model where you were selling to more affluent people and not just preying on their emotions, also appealing to them about the logic of acquiring a life insurance product, is that right?” asked Ms Orr.
“Yes,” Mr Martin said.
“Why a different sales approach to poorer people than to wealthier people?” she asked.
Mr Martin attempted to explain to Ms Orr that ClearView’s core business is in the advice space, and that by changing its strategy in the direct sales business it was trying to bring an advice-like element into the telephone sale of life insurance products.
“So a move from brief sales calls made with an emotional pitch to poor or poorer people, to a model that involved longer sales calls where, in your words, you wanted to make sure the customer thoroughly understood the product, to more affluent people?” Ms Orr asked.
“Yes, the people who could afford a bigger premium to cover the costs of doing all that,” Mr Martin confirmed.
Unsolicited calls
Later in the hearing, Mr Martin revealed that had ClearView known of the problems that would occur, it “would never have started” the direct life insurance sales business. He said the decision to begin selling life insurance direct to customers over the phone, and the targets that were set for salesmen, were based on what competitors had achieved.
“If we had our time again, we wouldn’t do that business,” Mr Martin said.
ClearView was one of six life insurers examined in ASIC’s 2016 review into the sector, which monitored hundreds of outbound sales calls.
Ms Orr brought the commission’s attention to the anti-hawking provisions outlined in the Corporations Act, which prohibit the sale of life insurance to a person in the course of or because of an unsolicited telephone call, unless the insurer complies with a number of requirements. Those include being placed on a ‘do not call’ register, giving the customer a PDS before they purchase the insurance and having the PDS read to them.
ASIC’s guidance on the anti-hawking provisions outline that a phone call is unsolicited unless it takes place in response to a positive, clear and informed request from a customer.
“Did ClearView breach the anti-hawking provisions, Mr Martin?” Ms Orr asked.
“Yes.”
“How many times?”
“I think out of the 32,000 policies sold it was maybe 40 per cent of them. I haven’t got the exact number, but maybe 10,000 or 12,000 times.”
Mr Orr asked Mr Martin when ClearView breached the anti-hawking provisions. He replied that the breaches occurred from late 2013 to the end of 2016, when the sales scripts were changed.
“Breach of the anti-hawking provisions is a criminal offence, isn’t it, Mr Martin?” Ms Orr asked.
“I understand that, yes,” he replied.
More to come.
