ACE Insurance contracted salespeople who travelled door-to-door selling and renewing Combined Insurance products. The majority of policies were sold in regional communities Australia wide.
This follows an in-depth investigation by ASIC into misconduct by those salespeople, including the making of misleading statements to consumers and the sale of unsuitable Combined insurance policies. ASIC’s investigation also focussed on allegations of systemic failures within the Combined Insurance division including poor culture and failure to ensure consumers were given appropriate advice.
ACE Insurance admitted that there had been contraventions of the Corporations Act and ASIC Act, including s.961L of the Corporations Act which required ACE Insurance to take reasonable steps to ensure its representatives complied with the best interests laws which fully came into effect on 1 July 2013 under the Future of Financial Advice (FOFA) reforms.
ACE Insurance has admitted that in the period from 1 January 2012 to 30 June 2014 a limited number of Authorised Representatives (ARs) in the Combined Insurance division engaged in some of the following conduct:
1. Overselling of Policies – ARs sold policies to consumers which duplicated coverage already held by the consumer and exceeded the underwriting limits imposed by Combined;
2. Twisting/Churning of Policies – ARs encouraged consumers to cancel their existing policies and take up new policies which resulted in a change of coverage for no benefit, and on some occasions a detriment;
3. Selling of Unsuitable Policies –ARs advised consumers to take up policies under which they would not be eligible for coverage, as they:
a. were ineligible to hold a Combined policy (such as disability pensioners), or
b. sought coverage for potential injury caused as a result of activities that were specifically excluded under the Policy (such as professional sports and off-road dirt-bike riding).
ACE Insurance further admitted that during this period it failed, in certain respects, to effectively implement a framework to foster and consistently maintain a culture of compliance within Combined, demonstrated by:
ASIC Deputy Chairman Peter Kell said: ‘ACE Insurance is a clear case of how poor culture and conflicts of interest in remuneration have led to poor conduct, resulting in a financial cost to both consumers and the organisation alike. ASIC’s priority in this significant investigation was the affected consumers, and we have pursued the best result possible for those consumers.’
ASIC acknowledges the cooperation of ACE Insurance in resolving this matter. Under the EU, ACE Insurance has undertaken not to provide personal advice in relation to Combined products and confirmed it will cease writing new Combined business. ASIC notes ACE’s announcement on 15 February 2016 that Combined Insurance will cease writing new business in Australia on 22 April 2016 and that the change will not impact existing policyholders.
Download the Enforceable Undertaking here
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