Freedom Insurance Group has parted company with its chief executive and its chief financial officer and embarked on a restructuring of its business in the wake of its appearance before the Financial Services Royal Commission.
The company announced yesterday that CEO Keith Cohen has left the company and that CFO Jenny Andrews intended to resign. Chief operating officer Craig Orton has been appointed CEO.
The Royal Commission heard that Freedom, which makes most of its money selling funeral insurance, had a record of making it very difficult for customers to cancel their cover. Staff were paid bonuses based on the number of policies they “saved”.
The Freedom board announced that new business sales of all direct insurance products have been suspended. It will continue to service its in-force book of policies and handle renewals.
The company will cut headcount “to align with its reduced activities”
The board said in a statement: “A previously announced, the board, with Deloitte’s assistance, has been undertaking a review of Freedom’s strategy, business structure and operating model.
“The strategic review considered options to transition the business model to comply with ASIC recommendations following its review into the direct life insurance industry. In particular, the board notes that Freedom’s upfront commission revenue is largely derived from the sale of final expenses insurance and the existing distribution model will not meet ASIC’s proposed new regulatory regime.”
ASIC released a review of the direct life insurance market in August, reporting that it was marked by aggressive sales techniques, inadequate information, high cancellation rates ad poor claims outcomes.
ASIC said people were being sold “products they don’t want, can’t afford or don’t perform as they expected.”
The regulator said it would restrict outbound sales of life and funeral insurance. It said that unless insurers could demonstrate that accidental death insurance could meet consumer needs, it expected them to stop selling it.
ASIC also said it expected to see changes to insurers’ incentive schemes as a result of Life Insurance Framework reforms that came into force earlier this year.
Freedom Insurance Group did not give any indication of the revenue or earnings impact of its restructure, except to say that business activity would be “reduced”.