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21-279MR ASIC sues former Freedom Insurance director and consultant over insurance sales incentive programs
ASIC has commenced civil penalty proceedings in the Federal Court against two individuals in relation to sales incentive programs offered by Freedom Insurance Pty Ltd (in liquidation).
Freedom Insurance was a case study in the Financial Services Royal Commission.
The proceedings allege Keith Cohen, the former Managing Director of Freedom, and Robert Oayda, a former Quality Control manager, were involved in breaches of conflicted remuneration and other laws.
ASIC alleges that both Mr Cohen and Mr Oayda were involved in decisions that saw sales agents qualify for overseas holidays if they reached certain sales targets and a Vespa scooter if they made the most sales. ASIC is concerned that these incentives influenced the sales agents’ conduct and made driving the sale their focus, rather than customer needs.
ASIC alleges that between November 2017 and October 2018:
- Mr Cohen was knowingly concerned in, or party to, breaches of the conflicted remuneration provisions by both Freedom Insurance and Insurance Network Services Australia Pty Ltd (in liquidation) (INSA) involving two separate trips to Bali and a Vespa scooter, and Mr Oayda was also knowingly concerned in, or party to, Freedom Insurance’s breaches;
- Mr Cohen and Mr Oayda were knowingly concerned in, or party to, breaches by Freedom Insurance of its licensee obligations arising from its breaches of the conflicted remuneration provisions; and
- Mr Cohen breached his director’s duties by exposing Freedom Insurance and INSA to a foreseeable risk of harm in relation to such conflicted remuneration.
ASIC Deputy Chair Sarah Court said, ‘The impact of incentives when selling financial products has been a longstanding issue for ASIC. We are concerned that incentives may cause sales agents put their own need for sales and reward above the needs of their customers.’
The alleged conduct relates to the marketing and selling by Freedom Insurance of insurance products issued by Swiss Re Life and Health Australia Limited, including final expenses cover (a type of life cover), accidental death cover and accidental injury cover.
ASIC is seeking declarations, civil penalties, injunctions and disqualification orders against Mr Cohen, and declarations and injunctions against Mr Oayda.
The proceedings are to be listed for case management on a date to be determined by the Court.
The Freedom Group companies were placed into external administration on 13 February 2020.
Mr Cohen was a director of Freedom Insurance, a director of INSA, and a Responsible Manager on Freedom Insurance’s Australian financial services licence. Mr Oayda was engaged by INSA as a consultant to deliver services to INSA and Freedom Insurance.
Freedom Insurance was a case study during round 6 of the Financial Services Royal Commission (Volume 2 - pages 302 to 317). ASIC commenced an investigation into Freedom Insurance prior to the final recommendations of the Royal Commission.
Freedom Insurance customers may be owed compensation and are being contacted by Genus Life Insurance Services. ASIC’s information on Freedom Insurance compensation provides further information for customers who were sold policies between 2010 and 2018.
ASIC’s Moneysmart website has information for consumers about buying life insurance, including a life insurance claims comparison tool, and a life insurance calculator that helps consumers work out whether they need life cover or how much cover they might need.
The first case management hearing will be heard before the Honourable Justice Cheeseman on Thursday, 11 November 2021.
Editor's note 2:
The matter has been listed for a further case management hearing on 16 December 2021.
Editor's note 3:
The matter has been listed for a further case management hearing on 21 April 2022.
Editor's note 4:
The matter has been listed for a further case management hearing on 18 May 2022.
Editor's note 5:
The matter has been listed for a further case management hearing not before 4 August 2022.
Editor's note 6:
The matter has been listed for a further case management hearing on 12 August 2022.
Editor's note 7:
The case management hearing has been adjourned to 19 August 2022.
Editor's note 8:
The case management hearing scheduled for 19 August 2022 has been vacated and relisted for 28 October 2022.
The matter is listed for a 10-day hearing of liability, commencing 17 July 2023.
Editor's note 9:
The matter has been listed for a further case management hearing on 28 April 2023.
Editor's note 10:
The case management hearing has been postponed until 22 May 2023.
Editor's case 11:
A further case management hearing has been scheduled for 7 July 2023. The matter remains listed for a 10-day hearing of liability, commencing 17 July 2023.