Federal Court: Select AFSL "acted unconscionably" when selling insurance

“In making findings of unconscionable conduct the Court has emphasised that consumers must have the opportunity to understand and consider the features of the insurance product they’ve been offered,” ASIC Commissioner Sean Hughes said in response to the court judgement.

The release said ASIC’s case focussed on the mis-selling of insurance over the phone to 14 consumers.

“English was not the first language of many of the consumers and some did not fully understand the products being sold to them or that they had even been sold the insurance,” said the release.

“ASIC is resolutely committed to protecting the most vulnerable consumers where they are targeted by mis-selling,” Hughes said. “A key driver of Select’s mis-selling was the unlawful sales incentive programs created for the agents, which were condoned by the companies’ managing director,” he added.

The Court said ASIC’s claim alleged both conflicted remuneration contraventions contrary to the Corporations Act 2001 and consumer contraventions of the Australian Securities and Investments Commission Act 2001.

ASIC also alleged breaches by Select of general obligations provisions imposed upon it as the holder of an AFSL and also alleged breaches by Russell Howden of his duties as director.

“Howden failed to take reasonable steps, or any steps at all, to prevent Select and/or BlueInc Services from contravening, or potentially contravening, ss 963E, 963F and 963J of the Corporations Act,” said the judgement.

Select was established in 2011 with Howden as sole director. The judgement referred to his more than 20 years’ experience in the insurance industry in Australia.

Hughes said the case serves as a reminder to insurers to ensure their distributors act appropriately and put consumer needs first. A penalty hearing is yet to be listed by the Court.