ASIC takes Freedom Insurance director and consultant to court

The Australian Securities & Investments Commission (ASIC) has launched civil penalty proceedings in the Federal Court against a director and a consultant at Freedom Insurance Pty Ltd two weeks after taking Insurance Australia Limited to court.

Early this month, ASIC filed civil penalty proceedings against Insurance Australia Limited over alleged misleading or deceptive conduct and accusations of false or misleading representations to certain customers of NRMA Insurance – a trading name of the company.

Now, ASIC has gone to court again, accusing former managing director Keith Cohen and former quality control manager Robert Oayda of being involved in breaches of conflicted remuneration and other laws, particularly in relation to the decision that saw sales agents qualify for overseas holidays if they reached certain sales targets and win a Vespa scooter if they made the most sales.

Read more: ASIC takes Insurance Australia Limited to court

Between November 17 and October 2018, ASIC alleged that:

• Cohen was knowingly concerned in, or party to, breaches of the conflicted remuneration provisions by Freedom Insurance and Insurance Network Services Australia Pty Ltd (INSA), both in liquidation, involving two separate trips to Bali and a Vespa scooter. Meanwhile, Oayda was knowingly concerned in, or party to, Freedom Insurance’s breaches;
• Cohen and 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
• Cohen breached his director duties by exposing Freedom Insurance and INSA to a foreseeable risk of harm in relation to such conflicted remuneration.

ASIC is concerned that the incentives influenced the sales agents’ conduct, driving them to focus on sales rather than customer needs.

“The impact of incentives when selling financial products has been a longstanding issue for ASIC. We are concerned that incentives may cause sales agents to put their own need for sales and reward above the needs of their customers,” said ASIC deputy chair Sarah Court.

ASIC seeks declarations, civil penalties, injunctions, and disqualification orders against Cohen and declarations and injunctions against Oayda.