After stopping new sales and revealing plans to more than splitting fifty-fifty its workforce, Freedom Insurance shares have fallen as much as 27 percent. Responsible for some of the evidence revealed at the banking royal commission, amid a regulatory crackdown on direct sales it has announced an overhaul to its business model. For its aggressive sales tactics Freedom Insurance came under fire, use of cold-calling and high commissions will service its existing policyholders but all new business has been suspended leaving the future in dark.
To assess future options for its business model, Freedom will continue to work constructively with its business partners. So far this year, the stock has now lost about 80 percent of its value. Craig Orton, who at the royal commission represented the company, will be replacing Keith Cohen who was Freedom's chief executive and has left the group.
Freedom sold out of policies like accidental death cover to a young man with ‘Down syndrome’ with a shocking recording of the sales call played in an inquiry. For most of its products Freedom had decided to cease outbound phone sales but Mr. Orton, however, was unable to provide any documentation of the major shake-up. By more than 50 percent workforce was slashed i.e. from 200 to 90 with remaining staff to continue renewing current policies and servicing existing policyholders with immediately suspending all new direct sales of insurance products including funeral cover, its main revenue source.
They expect these cuts to reduce operating expense by at least $15 million, including redundancy payments offset by $4.8 million in restructure costs. The company is not expected to generate revenue from an upfront commission but will continue to receive trailing commissions and fees from existing policies unless it restarts sales under a new business model in line with the commission. It will be interesting to see what’s left for Freedom without the model of direct selling. However, Mr. Stewart was seen apologizing and admitted the sales agent who made the calls should have for previous concerning behavior been fired earlier.
Freedom had engaged into unacceptable conduct in selling insurance to Mr. Stewart's son as Rowena Orr QC, Senior counsel assisting the commission told commissioner Kenneth Hayne. Freedom Insurance is not a member of the Financial Services Council which represents the life insurance industry.
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