In response to ASIC's concerns about its compliance with Australian financial services laws, Optus Insurance Services Pty Ltd (Optus) will refund approximately $2.4 million (including interest) to around 175,000 Optus mobile customers and will write to around 500,000 customers who may be affected.

ASIC’s concerns arose after Optus reported a breach about its failure to provide certain customers with a Product Disclosure Statement and a Financial Services Guide. This breach affected customers who purchased mobile phone insurance in store or by telephone, and occurred over a number of years. As a result, many customers may not have been aware of certain key features and limitations of the insurance that they purchased.

Following ASIC's inquiries, Optus reported four further breaches where customers:

1. did not receive one month free insurance under a promotional offer they were entitled to;
2. were incorrectly charged a premium for insurance during a ‘rain-check’ period;
3. were not provided with the required information before purchasing an insurance policy over the telephone (e.g. information about excesses and cooling-off rights); and
4. were issued the wrong cover. Some customers received ‘Device Insurance’ cover instead of the more favourable and less expensive ‘Yes Cover’.

ASIC was concerned that these breaches indicated that Optus had inadequate compliance systems and processes, such as training, monitoring and supervision of staff.

Optus will be writing to all customers who may be affected. Where overcharging has occurred, Optus will take steps to contact past customers and will compensate current customers by a direct credit to the customer's account. Compensation will include interest. Optus is also proposing to pay amounts owing to former customers who cannot be located to a charity assisting with financial literacy.

In response to ASIC's concerns, Optus has appointed an independent external firm to conduct a comprehensive review of its compliance functions to ensure ongoing compliance with its Australian financial services licence obligations.

ASIC Deputy Chairman Peter Kell today welcomed the steps taken by Optus to compensate affected consumers.

‘It is important that when a business is licensed by ASIC to sell financial products to retail consumers, it ensures that it does so consistently with the representations it has made to consumers, and in compliance with the financial services laws. Where consumers have suffered a detriment, it is important that remediation is undertaken, and that steps are taken to ensure that the business is operating in compliance with the relevant legal obligations.’

Consumers who purchased mobile phone insurance from Optus and who think they may be affected by these breaches should contact Optus on 1800 854 349 (Mon to Fri 8am-6pm).

Editor's note:

ASIC's MoneySmart website has helpful tips for consumers on how to choose the right mobile phone insurance.