Ethics and Governance in Freedom Insurance: A Case Study

This report discusses the ethical standpoint of the Royal Commission of Australia in relation to the case study of Freedom Insurance. It explores the theory of justice and how it was reflected in the investigation of the unethical business practices of Freedom Insurance.

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ETHICS AND GOVERNANCE
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Executive summary
The Royal Commission of Australia is committed to safeguard the ethical business practice in
Australia. It means, the institution shares a clear perception regarding the relationship between
the business farms and the consumers. As a result of that it becomes the institutions contributes
to the formulation of a good society. In addition to this, it can be stated that the role of the
organisation is to investigate the legal breaches within the organisations that can affect the
consumer interests effectively. This is a clear example of the theory of justice that the Royal
Commission follows in its activities. In this regard, this report is going to discuss the ethical
standpoint of the institution. For a better discussion, the report chooses the case study of
Freedom Insurance and concluded that the theory of justice was rightly reflected while Royal
Commission investigated the case.

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Table of Contents
Introduction......................................................................................................................................3
Theoretical perspective....................................................................................................................4
Comparing to Royal commission................................................................................................7
Related to the Freedom insurance....................................................................................................8
Misconduct..................................................................................................................................8
Unethical influence on employees...............................................................................................9
Lack of quality assurance..........................................................................................................10
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................12

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Introduction
Royal Commission of Australia is responsible to provide the regulatory and legal backups
to the Australian legislative in order to monitor the effective business practices among the
Australian financial and superannuation sector. Popularly known as the Banking Royal
Commission and the Hayne Royal Commission, it came into force in 2017 by the Australian
government (Royalcommission.gov.au., 2019). As a matter of fact, the Royal Commission Act of
192 also provided adequate legal support to the activities of Royal Commission of Australia. It is
important to monitor and control the activities of financial institutions in Australia with the
purpose to safeguard the citizens from banking misconducts and fraudulence. The Honourable
Justice Kenneth Madison Hayne id served as the sole commissioner of the organisation
(Royalcommission.gov.au., 2019). In repose to this, the case study of the Freedom Insurance is
came into the discussion of the report that pointed out the unethical business practices that the
organisation was practiced in order to maximise its policyholders. In case of the Freedom
Insurance, the sales agent was breached the moral as well the legal principles of not to push the
vulnerable people to pursue any loan or signed any financial agreement in the absence of his or
her guardian. It seemed the organisational culture of Freedom Insurance as not right at all and
encouraged the sales agents to pursue unethical business practices in order to maximise the
profitability of the organisation.
Based on this understanding, this report aims to focus on the level of moral and ethical
breach that the organisation was practiced deliberately. For the discussion, at first the report
cares to provide a detailed theoretical perspective on the process of perceiving a clear idea about

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the ethical breach that the organisation was violated. In the next section, the report intends to link
the theoretical understanding with the case study of Freedom insurance.
Theoretical perspective
Ethical realism is considered to be one of the major ethical principles in the professional
and scholarly discussion. In this regard, Rawls theory of ‘Justice as fairness’ is considered to be a
justified theoretical aspect that deals with the regulatory bodies and objectives. From this point
of view, Mandle (2017) argued that there was a core difference between justice and morality.
From the philosophy of Plato, justice is a concept that connotes an indistinguishable approach in
compare to the concept of rightness. Therefore, it is important to get a clear perception regarding
the difference between justice and morality. On the other hand, Özbek, Yoldash and Tang (2016)
tried to define justice in reference to the existence of virtue. As per the claim it can be stated that
in a good society justice is characterised as the first virtue. Justice is a concept that shapes the
society through the moral principles and legal restrictions (Claassen, 2017). In fact, justice is
necessary for delivering a sufficient condition of a good society. However, there are some
measures that the organisation has to follow in terms of making an effective society. For
instance, justice should have a link with the way of a social advancement and progress for
condemning the practice of causing the moral degradation in society. As a matter of fact,
Matsuda (2017) advocated that the justice is used as the foundation of a social structure.
Therefore, the political and legal decisions are coupled with the practice of making a good
society.
Based on this understanding, the theory of justice is associated with the notion of
providing the people all the rights and liberties to decide the principles of justice. In this context,

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the paradigm of ‘veil of ignorance’ is practiced as an important aspect for the development of
justice and evaluating the principles of justice. According to Bosse and Phillips (2016) the veil of
ignorance defines the self-interested people who have ample knowledge of what is right and
what is wrong and they choose the right path intentionally. Moreover, the research of Nardin
(2017) also opined that the veil of ignorance made people unaware of their past so that people
did not care about their profession, race, gender and the social status. Their entire concern is
focused on the practice of establishing a good and healthy environment that is entitled to bring
peace and prosperity for all. Based on this concept, the principles of justice is also established
with a clear view that the goods and right things will be valued by all (James, 2017). This
perception further refurbish the concept of making an logically approved argument that can
relied on the practice of delivering fair distributions of goods and prosperity. In fact, the theory
propounded by Rawls identified justice on the basis of the reflective equilibrium (Sovacool et al.,
2016). In other words, it can be derived from the principle of Rawls that the reflective principles
led to the effective means of developing an effective and incompatible less intuitive principles
that will be rejected in order to set up the practice of coherence (Shi et al., 2016).
Based on this principle there are two significant argument that can be identified as the
principles of theory of justice. For example, the first argument advocated that each person has to
have equal rights on the basis of the extensive total system of equal basic liberties compatible
with the similar system of liberty for all (Olafsen et al., 2015). On the other hand, the second
argument is more concerned about the social and economic equilibrium in terms of two different
but interconnected perception (Kaiser & Holtfreter, 2016). Such as the first perception advocated
about the fair and equal opportunity for all irrespective of their social and economic status and
positions. In addition to this, the second perception is related to the understanding of greatest

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expected benefits of the least advantaged members of the society. The second principle is more
of a negative approach for the benefit of the society that pushed Rawls to focus on the first
principle. From a clear understanding, it can be stated that the theory of justice is resembled with
the practice of establishing equal opportunity for the people despite of having different
perspective and socio-economic status (Anastasiou, Kauffman & Michail, 2016). In this regard,
the moral consideration has a unique role to play in order to establish equilibrium in a society
without having the real interference of the legal proceedings. The practice will be developed on
the basis of a spontaneous mind-set rather than a top down imposition of the regulatory
intervention.
This core argument is further extended by the specific types of interactional justice. As
Schminke, Arnaud and Taylor (2015) articulated that the role of the monitoring organisations has
to develop a communication with the monitored organisation and evaluate their proceedings in
the light of ethical consideration. In other words, Singer (2018) articulated that the governing
body is played as a guardian of the ethical principles and moral establishments. Therefore, it has
been an important aspect for the institution to influence and convince the organisations to follow
an ethical business activities so that it will generate sustainable business environment within the
organisation (Zwolinski, 2017). Nevertheless, in case of any violation or breach in the principles,
the responsible institution will initiate preliminary investigation against the complaint and will
find out the perpetrators. However, a major thrust of the institution is to communicate with the
relevant organisations who are entitled to cooperate with the monitoring body. Therefore, a
spontaneous but effective communication is developed in order to bring moral justice in the
entire aspect (Konow, 2017). It is associated with the flexibility and fairness of justice to

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establish good society with the help of adequate legislative and moral establishment (Cugueró-
Escofet and Rosanas, 2017).
Comparing to Royal commission
In compare to the role of the Royal Commission of Australia, it can be argued that the
theory of justice is rightly relevant with the activities of the organisation. It is the objective of the
royal commission to monitor the business activities of the financial business organisations in
Australia and put a thrust on the consumer rights so that a balance and better relationship
between the private financial business companies and the consumer interests will be settled.
From the view point of Royal Commission, it is important to set an example for the business
organisations and encourage them to pursue sustainable business practice within the country.
Henceforth, apart from the regulatory framework, the commission set some moral guidelines for
the private farms so that they will abide the norms of commission and set their plans accordingly
(Ansaloni & Tedeschi, 2016). Based on the principles of theory o9f justice, the Royal
Commission of Australia also emphasises on the equal opportunity and common interests of the
buyers and sellers so that both the party will respect each other. This practice seems to have a
correlation with the practice of making a good society where peace and prosperity will be existed
side by side. In addition to this, it can be stated that the Royal Commission also manages public
hearings between the two confronting parties. Playing the role of a mediator, Royal Commission
interacts with different parties and listen their grievances with providing evidences. After that the
final verdict of the case has been made. From that point of view, it can be stated that the role of
Royal Commission of Australia is clearly coupled with the theory of justice and specifically
interactional justice.

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Related to the Freedom insurance
In case of the Freedom Insurance, the Royal Commission of Australia highlighted three
specific breach of code in terms of the misconduct, unethical influence on the employees and the
role of the lack of quality assurance.
Misconduct
The ethical misconduct had been occurred during 2016 when the company deliberately
sell an insurance policy to a client who was suffered with Down syndrome. It can be stated that
the agreement of the insurance was purely based on a unethical practice as the father of the
mentally challenged person remarked that his son was not in a position to understand what must
do and what must not. Therefore, the insurance had to be void and subjected to further
investigation on Freedom Insurance that how did they make an agreement with a person who
was incapable to understand anything. Both the parents were the only hope of Mr ‘Stewart’s son
and they managed their son’s accounts. Therefore, Mr Stewart asked the Freedom Insurance to
provide the conversation with his son as he feared that the insurance company forcefully
convinced his son. His son was also disabled to understand what he was going to sign for.
However, the company neglected the complaint of Mr Stewart and apologised only
(Royalcommission.gov.au., 2019). No official mail or letter was generated against the situation.
At the same time, Mr Stewart was also asked to get a copy of the telephonic conversation
between the company agent and his son. In return, he got no answer till the Royal Commission
intervene. From this point of view, it can clearly be argued that the Freedom Insurance
intentionally slow down the investigation and non-cooperating with the clients.

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Based on this understanding, the Royal Commission condemned the Freedom Insurance
for unethical business practice and handed over the matter to ASIC to review the actions taken
by the Freedom management and customer service.
Unethical influence on employees
This kind of misconduct was not a new or isolated event that the company sales agent had
done unintentionally. In previous times also the insurance company also took followed the
practice of approaching to the vulnerable customers and pushed them to sign up for an insurance
plan. It can be stated that the Australian government highly puts emphasis on the vulnerable
groups and the people who are suffering with mental illness. Therefore, prohibition was imposed
on convince the mentally retarded customers. Selling insurance to the vulnerable people was a
sheer act of ethical breach. In fact, Freedom insurance also violated the regulatory framework in
terms of the sections 12CA and 12CB of the ASIC Act (Royalcommission.gov.au., 2019). It was
clear that the organisation deliberately practice such a measure in order to maximise its
profitability that can be identified as ethically wrong in the eyes of the Royal Commission of
Australia.
Therefore, the Royal Commission alleged the Freedom Insurance management to
encourage the employees to practice unethical behaviour in workplace. However, the
organisation did not corroborate the allegation but the logically explanation of the Royal
Commission made it clear that the session was of high concern for the commission. The use of
the vulnerable groups for the development and profitability of the organisation was identified as
a nefarious and inhumane act.

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Lack of quality assurance
From the legal session between Mr Stewart and Freedom Insurance, it can be stated that
the organisation is highly emphasised on its profitability rather than copping with the practice of
initiating sustainable business practice. For instance, the quality of the customer service in
Freedom Insurance was a sham because the organisation did not cooperate with the customer to
understand their problems and requirements. Moreover, the quality of sales within the
organisation was also failed. In case of Mr Stewart’s son, the sales call would not marked as fail
even it was proved that the approach of the sales executive was misleading, deceptive, false and
unethical. This kind of practice was also established within the organisational activities before
the case of Mr Stewart. Mr Orton, the Chief Operating Officer of Freedom Insurance had
confirmed that the retention agents were strictly directed to convince the policy holders by any
means to continue the policy. It does not seem appropriate in case of the vulnerable people.
Nevertheless, the company did not follow any mechanism to exclude the vulnerable customers
(Royalcommission.gov.au., 2019). In fact, the ASIC investigation argued that there was a
possible breach in Freedom Insurance’s remuneration practice under the section 963E of the
Corporations Act. The act prohibits the financial service holders to accept conflicted
remuneration. As a result of that it can be stated that the role of the organisation in securing the
interests of the employees and procuring an effective organisational practice within the company
was highly damaged in order to maximising the profitability of the organisation.
Conclusion
Based on the above discussion, it can be confirmed that there are series of unethical
practices that the Freedom Insurance had practices for extracting more revenue from the clients

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and target customers. For instance, pushing the vulnerable people to take an insurance was a
culpable and inhumane practice that the organisation was enjoyed. In addition to this,
encouraging the employees by lucrative remuneration system also created unethical and dubious
practice for Freedom Insurance that damaged the quality assurance measures of the organisation.
Based on this understanding, the intervention of Royal Commission of Australia was highly
commendable and highlighted the effort to bring efficacy into the entire system of Freedom
Insurance. As a matter of fact, the ethical background of the Royal Commission also boosted up
the institution to procure an effective and elaborate process with the help of the theory of justice.
Based on this approach, the Royal Commission focuses on developing a good society in
assistance with the equality and interaction with the consumers and the business organisation as
well. The court sessions help the Royal Commission to set a better place for face to face
interaction with the customers and the corporate farms. Therefore, it can be concluded that Royal
Commission of Australia was ethically strong and effective to make a better society on the
principles of theory of justice.

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