The Australian Securities & Investments Commission (ASIC) recently announced that Optus Insurance Services Pty Ltd (Optus) will refund approximately $2.4 million to around 175,000 of their mobile customers who purchased mobile phone insurance in store or by telephone over a period spanning several years. Optus will also write to approximately 500,000 further customers who may have been affected. This outcome is the result of ASIC raising concerns with Optus about a range of breaches reported by Optus. The media release from ASIC can be found here.
The breaches included:
- failures to provide certain customers with a Product Disclosure Statement and a Financial Services Guide;
- failures to provide customers with the required information before purchasing an insurance policy over the telephone (e.g. information about excesses and cooling-off rights);
- incorrectly charging premiums;
- issuing the wrong cover; and
- failing to provide benefits promised under a promotional offer.
ASIC was concerned that these breaches indicated that Optus had inadequate compliance systems and processes, such as training, monitoring and supervision of staff. In addition to refunding $2.4 million (which includes interest), Optus has appointed an independent external firm to conduct a “comprehensive review of its compliance functions to ensure ongoing compliance with its Australian financial services licence obligations”.
The refund is a very substantial sum of money and there are clearly reputational risks. According to news reports, ASIC deputy chairman Peter Kell said that ASIC decided not to seek penalties by pursuing matters in Court because ASIC’s priority in this instance was to get the money back to customers as quickly as possible. ASIC’s scrutiny underscores the importance of businesses understanding their regulatory obligations and ensuring their compliance systems are adequate. In particular, the Corporations Act 2001 (Cth), the Regulations and ASIC Class Orders create a complex regime for the sale of insurance, in particular over the phone. These rules are designed to ensure that customers are aware of the key features and limitations of any insurance policy about which they receive advice.