Trips to Bali, Vespa scooters and “cash money” were among the prizes used to lure call centre staff to beat sales targets, the banking royal commission has heard.
- The commission heard about incentives that fuelled an aggressive sales culture at Freedom Insurance
- A man with Down syndrome unwittingly took out several insurance policies after answering an unsolicited call, the commission heard
- The commission was told of a major change to sales at Freedom Insurance a day before its appearance
The second day of the inquiry’s insurance hearings revealed shocking stories of vulnerable people being pressured into purchasing life insurance policies.
Freedom Insurance chief operating officer Craig Orton faced questions over the company’s practices.
He joined the insurer in February this year.
The inquiry heard evidence of the incentives that fuelled an aggressive sales culture within the company’s call centres, which sold cover including accidental death and injury insurance over the phone.
Freedom Insurance’s call centre staff began in “debt” as far as their commissions were concerned, having to sell enough to cover the cost of their “seat”, among other expenses, before starting to earn commission on top of their base pay.
“The commission structure that you’ve had in place in recent years has created a situation where your sales agents have been incentivised to aggressively pursue sales?,” asked senior counsel assisting the inquiry Rowena Orr QC.
Mr Orton said: “I agree, I think all incentives have that effect.”
Ms Orr detailed emails to Freedom Insurance staff pushing them to sell more policies in exchange for rewards.
“Everyone aiming for seven lives over the first two sessions — 3.5 lives [insured] per session, easy-peasy — and we’ll smash 400 lives to lock in the incentive money for the last part of the day,” Ms Orr read from one email exchange.
Mr Orton agreed the behaviour was poor and unprofessional.
Another campaign dangled the prospect of a holiday to Bali.
“Start the morning here with a coffee and Krispy Kreme donuts,” Ms Orr detailed.
“Get on the phone and sell, sell, sell, with one thing in mind — get to Bali.”
Mr Orton said he was “as livid with it as you are”.
Last Friday, Freedom Insurance informed the corporate regulator ASIC it had breached the Corporations Act between January and May this year, as its commission structure violated the ban on conflicted remuneration.
Mr Orton said commissions would no longer be paid from the end of the month.
Commission heard of overhaul a day before appearance
Freedom Insurance sells life, trauma, accidental death, injury, funeral and loan protection insurance.
Outbound sales calls have been a major part of its business model.
However, Ms Orr said Freedom Insurance contacted the commission at 3:00pm on Monday and said it would cease outbound sales calls for most products but would continue to spruik its highest-selling product — funeral insurance.
On Monday night, the commission requested documents about the major changes from Freedom Insurance but only received one set of board meeting minutes from last week.
Ms Orr: “There are no documents recording that decision that you made in late July or early August?”
Mr Orton: “There are no documents because it was the decision between the CEO and I. There was no intent to not provide the right information, and we have provided a lot of detailed information to the commission.”
Ms Orr: “Just not a key piece of information, Mr Orton, which is that you’ve ceased the outbound selling of those products from late July or early August?”
Mr Orton agreed that, in hindsight, the insurer should have informed the commission earlier.
Man with Down syndrome targeted
In some of the most shocking evidence presented to the inquiry so far, Ms Orr played extracts of sales calls made to a 26-year-old man with Down syndrome.
Grant Stewart, a Baptist minister from Victoria, told the hearing his son had unwittingly taken out several insurance policies, including accidental death cover, after answering an unsolicited call.
Mr Stewart discovered the situation after receiving mail from Freedom Insurance.
His son lives at home and requires general care and help with decision making.
“He was quite distressed about it and thought he had done something wrong, and seemed embarrassed and perplexed about the whole thing,” Mr Stewart said.
Extracts of the phone calls illustrated Mr Stewart’s son’s confusion and limited responses, as a Freedom Insurance sales agent spoke quickly and with a thick British accent about the details of the products.
When he tried to cancel the policies, Mr Stewart met with resistance and was told about the benefits of the cover.
After cancelling the insurance, it took another two years before the Stewarts received an apology from Freedom Insurance.
Mr Orton said the calls were “deeply troubling” and “do not make for comfortable listening”.
Later, the inquiry heard the sales agent who made the calls had already received warnings over his conduct but had not been terminated.
He was reprimanded for checking Facebook during calls and incorrectly logging calls in the system.
A $2,000 penalty was docked from his commission on the final warning, but Ms Orr suggested this could have resulted in even more aggressive selling to recoup the money.
Ms Orr: “He shouldn’t have still been there to make that call [to Mr Stewart’s son] should he, Mr Orton?”
Mr Orton: “I agree — not in my opinion.”
The sales agent was dismissed after Mr Stewart’s complaint about the call.
Mr Orton will return to the commission on Wednesday.