ClearView, a life insurance company under the microscope of the Royal Commission inquiry into financial misconduct, has admitted that it did not intend to churn out what its Chief Actuary and Risk Analyst, Greg Martin, labeled a “rubbish” product.
After refunding $1.5m to 16,000 customers who received substandard insurance products, the company has now said that it will discontinue any product deemed to be of a poor standard, despite it never having the intention to offer the market a badly reviewed product.
Martin faced questions from the Royal Commission on behalf of ClearView as the inquiry’s scrutiny moves on to the life insurance sector. This is currently the sixth round of hearings that have already claimed the careers of several CEOs as well as lead to payouts from companies whose product offerings were negligent at best.
Following questioning from the Australian Securities and Investments Commission (ASIC) earlier this year, ClearView admitted fault and agreed to issue the $1.5m refund. The company faced accusations of unnecessary high-pressure sales tactics and coercing potential consumers to agree to their terms.
The counsel for the inquiry, QC Rowena Orr, said that the insurance sector has to look at itself more closely after the revelation that life insurance companies have been paying out huge sums to financial advisers in the last few years to the tune of a whopping $6bn.
Martin stood down suggestions that his company had deliberately targeted the poorest in society because they were most likely to feel that they had to agree to the terms on offer. He said that ClearView had aimed its product at the “lower, not lowest” socioeconomic groups.
Asserting that marketing a product to those unable to pay for it in the first place had “no point,” Martin said that it was designed for “customers who could afford the product.”
However, in acknowledgement of how high the lapse rates were for the company’s product, he admitted that these failures in fact led to the closure of ClearView’s direct sales business back in 2015.
ASIC took ClearView to task over its dealings earlier this year, lamenting the behavior of its sales agents, which included making “misleading statements about the cover, the premiums” and how any pre-existing conditions would affect the insurance policy that customers carried out.
One incident highlighted by the inquiry was that of an elderly cleaner who had only called ClearView because “I just wanted life insurance, you know.” The cleaner was then convinced to buy accidental death insurance, a product with a higher cost per week.
ASIC has spoken out against accidental death insurance for carrying “little benefit to consumers.” In the cleaner’s case, her sales agent told her that the product that she wanted was unavailable to her and that she had to take out a policy with a larger fee.
While ASIC has called for all sales agents to cease offering accidental death insurance policies, Martin admitted that he did not have any time to read its report, except for the executive summary. He added that he could not properly comment until he read the review in full.
Martin, however, was adamant that ClearView will not keep a product on the market if both consumers and the regulatory bodies reject it.