ClearView boss looked to ‘circumvent’ FOFA and break the law

ClearView Wealth’s chief actuary and risk officer Gregory Martin returned to the witness box this morning, where he was questioned by counsel assisting Rowena Orr QC about the company offering a travel and accommodation package to Queenstown as an incentive for sales staff.

The commission learned of an email sent to the head of ClearView’s direct sales division to senior management outlining his plans for the trip. It stated:

We will work with respective departments to reduce tax exposure, FBT implications and circumvent regulatory barriers. Packaged as a training and educational trip in lieu of FOFA conflicted remuneration.

Ms Orr questioned Mr Martin about this internal email that was brought to his attention in the final quarter of 2016.

“So the head of direct sales within ClearView knew that this was conflicted remuneration, a breach of the FOFA reforms, knew that it was a breach of the law and therefore elected to package it deceptively as a training and educational trip?” she asked. “What action did you take?”

Mr Martin replied that the trip did not go ahead, and that he discussed it with the managing director and CFO.

“There was no response from me. I don’t actually know that I read all the way to the bottom [of the email]. But I visited the MD and CFO and said ‘over my dead body’,” he said.

Ms Orr asked if there were any consequences for the head of sales, given his plans to circumvent the law and package the junket as an educational trip. Mr Martin said there were no consequences for the head of sales.

“None of you took any steps to sanction or discipline the head of sales over his intention to breach the law,” she said.

Unsolicited calls

On Monday, Mr Martin revealed ClearView’s decision to begin selling life insurance direct to customers over the phone, and the targets that were set for salesmen, were based on what competitors had achieved.

“If we had our time again, we wouldn’t do that business,” he said.

ClearView was one of six life insurers examined in ASIC’s 2016 review into the sector, which monitored hundreds of outbound sales calls.

Ms Orr brought the commission’s attention to the anti-hawking provisions outlined in the Corporations Act, which prohibit the sale of life insurance to a person in the course of or because of an unsolicited telephone call, unless the insurer complies with a number of requirements. Those include being placed on a ‘do not call’ register, giving the customer a PDS before they purchase the insurance and having the PDS read to them.

ASIC’s guidance on the anti-hawking provisions outline that a phone call is unsolicited unless it takes place in response to a positive, clear and informed request from a customer.

“Did ClearView breach the anti-hawking provisions, Mr Martin?” Ms Orr asked.

“Yes.”

“How many times?”

“I think out of the 32,000 policies sold it was maybe 40 per cent of them. I haven’t got the exact number, but maybe 10,000 or 12,000 times.”

Mr Orr asked Mr Martin when ClearView breached the anti-hawking provisions. He replied that the breaches occurred from late 2013 to the end of 2016, when the sales scripts were changed.

“Breach of the anti-hawking provisions is a criminal offence, isn’t it, Mr Martin?” Ms Orr asked.

“I understand that, yes,” he replied.