Case Study: CommInsure fined $700,000 for hawking offences
In a landmark case, the Colonial Mutual Life Assurance Society Ltd, trading as CommInsure, was fined $700,000 on 28 November 2019 after earlier pleading guilty to 87 counts of offering to sell insurance products in the course of unlawful, unsolicited telemarketing calls. This conduct is known as ‘hawking’.
This was the first prosecution of its kind for these offences in the Corporations Act.
Between October and December 2014, CommInsure, a wholly‑owned subsidiary of the Commonwealth Bank of Australia (CBA), through the telemarketing firm Aegon Insights Australia Pty Ltd (Aegon), unlawfully sold life insurance policies known as Simple Life over the phone. CommInsure provided customer contact details to Aegon from CBA’s existing customer database.
Calls to 87 CBA customers were unlawful and unsolicited. This meant that those customers were unaware of whether the cover was suited to their personal circumstances, and what exclusions applied. Some customers were given the opportunity to have the full product disclosure statement (PDS) read to them, but only after they had become bound to acquire the financial product.
Customers were first warned that reading it would take 30 minutes, which discouraged them from taking up the offer.
In one recorded phone call made in 2014, a customer clearly indicated that he was not looking to buy insurance, however the telemarketer persisted and convinced him that he should do so. The telemarketer closed the sale without offering to read him any information that was required to be included in the PDS for the product.
In sentencing, Her Honour Magistrate Atkinson of the Downing Centre Local Court in Sydney said there is a ‘significant need for deterrence’, and that those who market and sell insurance products ‘must ensure that they comply with what is important consumer protection legislation’.
While the maximum available fine was $1,850,700, Her Honour took into account CommInsure’s cooperation with the Australian Securities and Investments Commission (ASIC) and early guilty plea. If the conduct had occurred after March 2019, when new increased penalty provisions came into effect, the maximum applicable penalty would have been $10,962,000.
Shortly after the sentence was handed down ASIC announced a total ban on unsolicited cold call telephone sales of direct life insurance and consumer credit insurance. This was in line with a recommendation made by the Financial Services Royal Commission.