That the insurance industry section of the financial services royal commission would be a horror show has been long known, and so far it hasn’t disappointed. The entire industry — with the exception of QBE — has admitted to some form of misconduct. And yesterday the commission dwelt at length on the conduct of ClearView, whose cheery website promises “a new kind of insurance, investment and advice company” but which in fact operated a lot like the boilerrooms of decades of Hollywood movies: insurance was sold via fast-talking operators over the phone targeting low-income earners, indigenous people and others seen as easy marks, as the company racked up 300,000 — three hundred thousand — breaches of anti-hawking laws.
ClearView’s Greg Martin was back in the witness stand this morning, agreeing with pretty much every damning point put to him by counsel assisting as the company’s calls to luckless marks were played to him. Yesterday he talked of how insurance was a “grudge” purchase that consumers had to be pushed into making. One might venture that before the week is finished, insurance purchases might be a hell of a lot more grudging than they are already.
ClearView’s breaches were so egregious even toothless watchpoodle ASIC tiptoed into action last year, eventually forcing the company to repay $1.5 million to customers. Not that ASIC imposed an enforceable undertaking or took any regulatory action — it merely agreed that ClearView would refund some money, “engage an independent expert to provide independent assurance over the consumer remediation program” and stop selling insurance that way.
It also took ASIC nearly five years to intervene in conduct that began in 2013 and didn’t end until midway through 2017. ClearView isn’t a fly-by-night mob or industry tiddler – it’s ASX-listed and had acquired BUPA’s life arm a few years before the misconduct started. It should have been in ASIC’s sights. But in defence of the regulator, ASIC, already suffering from efficiency dividend cuts imposed by Labor, was gutted in the 2014 budget, losing over $100 million over forward estimates and more than one in ten staff. At the very time ClearView’s boilerroom was hitting the phones, ASIC was having to sack staff — and all the while it was under pressure to go after that other den of thieves, the financial planning industry.
The ASIC regulatory model bequeathed to us by the Wallis banking inquiry, in which a passive, complaints-based regulator takes years to swing into action even in the face of egregious misconduct is only ever going to have a chance of being effective if much heavier punishments are meted out. At the moment, companies know that even if they end up on ASIC’s radar, it will take years for the regulator to issue a press release announcing some compensation agreement or, at worst, an enforceable undertaking. If company executives knew that a possible jail sentence awaited them at the end of that process instead, that might act as a greater spur to ensure good corporate conduct.
One of the problems at ClearView was apparently that executives didn’t have much idea either of how the company’s remuneration scheme incentivised misconduct or of why they were breaking they law with their boilerroom. But is this media release, after nearly five years, any sort of incentive to correct that?
Lock some executives up for a couple of years, and you can bet they’d acquire a much sharper appreciation of the finer points of anti-hawking laws.
What do you make of the findings of the royal commission into the insurance industry? Write to boss@crikey.com.au and let us know.
Further proof of the need for a better funded more aggressive regulatory body that is not a political tool, alongside a federal crime and corruption investigative body.
I continually hear of the spurious economic benefits of government policy, NDInsuranceS for example.
Surely the benefits to Australian society and public confidence in government regulated operators, via a reduction in corruption and criminal behaviour in the public and private sector will have far greater positive effects?
I suspect that once again the fraudsters will go bankrupt and run off with a bag of cash legally, yet not at all ethically their property.
Commissioner Hayne and the Counsel Assisting him are a five star crew. The research done, leading to the forensic questions asked of those on the stand, has obviously been wonderfully thorough.
If only we could have a government so capable of working through the preliminaries and being across the detail and well prepared. Instead they cannot even answer a simple question around why they got rid of a prime minister.
That’s 300,000 breaches of criminal laws, as I understand it, as opposed to corporate laws.
So surely someone should go to gaol?
On another related matter, The Age in its reporting yesterday said that ClearView purchased the personal information of a few hundred thousand people. Surely it is time the practice of selling personal information is made illegal?
And didn’t the Productivity Commission recently recommend that personal information belongs to the person?
Ever distrustful of business generally, the Hayne Royal Commission evidence of deliberate and persistent criminality has even surprised me. The RC is effectively showing that every big business is fundamentally immoral and even evil. But while the legal system is used to persecute and prosecute whistleblowers in preference to genuine criminals, we will get more of the same. It will be a test of Labor’s resolve that it brings to the next election effective policies of intolerance of corporate criminality and promises to gaol those proven to have engaged in criminal conduct. As for ASIC, while its resources have been eroded, its ability to publicly disclose corporate criminality and wrong-doing has not been legislatively curtailed. It just chose to cooperate with the criminals. ASIC stands damned as an utter failure as a regulator.
And this is only the begrudged Turnbull-Morrison Reader’s Digest RC version. Imagine what we’d get if it ran “as long as it takes” – imagine how Scummo would have to spin to mitigate that fall-out for his sponsors?