Unethical Practices in Freedom Insurance Case

This report analyzes the unethical practices and misconducts in the Freedom Insurance case, as identified by the royal commissioner. It discusses the impact on accounting standards and the future of the financial service industry. The report also provides a personal reflective essay related to the case.

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Financial accounting
Name
Institution
Date

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Executive summary
The royal commissioner released the final report as well as the case study reports of the
financial service companies in Australia. The royal commissioner addressed several challenges
he had identified in the field including fraud, law-breaking, unethical conducts as well as poor
rewarding practices. Freedom insurance is one of the companies that submitted their case before
the royal commission. The royal commission identified several failures which the company was
operating with including illegality, unethical practices, and poor retention as well as punishment
system. Several incidences were highlighted by the commission which will be very critical in
assisting the setting of accounting standards as well as rules to govern the industry. This case
represented a global perspective of most industries and provided for a chance for changes to be
initiated. This report was aimed at the analysis of one of the Australian financial service form
which was studied by the royal commissioner during the release of the final report in 2017.
Freedom insurance was selected as one of the firms which had most of the unethical practices in
Australia. The paper outlines the incidents of unethical behavior as well as the future of the
industry after the discovery of this case. Finally, the report covers a personal reflective essay
which is related to the case of freedom insurance.
PART A
Freedom insurance
This is the case of one of the financial institution which offers financial services in
Australia. The company presented their c their cases before the royal commission for evaluation
and this is the report of the findings of the royal commissioner on freedom insurance case.
Freedom insurance used to market and distribute insurance policies in a direct way to their

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customers which was done through telephone calls. Mr. Olton was the chairman of the firm by
that time and in the sixth round of hearing, he presented the firms' evidence that they had
refereed from marketing and selling insurance policies and had only remained with funnel
insurance policy (Australia. Royal Commission into Misconduct in the Banking; Superannuation
and Financial Services Industry. 2019 p298). Having made such a critical decision and the
company was one of the listed financial firms in the country the firm had failed to publish the
decision.
According to the royal commissioner, the evidence was easily disbelievable as there
existed no evidence that the company had changed her business structure. Clear evidence was
referred by the royal commission; the case involved the sale of a life insurance policy over the
phone to a son who was vulnerable as he was disabled. Mr. Stewart son was contacted through a
phone call and he was forcefully sold the insurance cover as the agent who contacted him
collected the credit card number of the son and made the deductions to cater for the policy.
Following the case Mr. Stewart had a great challenge to connect to the agent who sold the cover.
Moreover, the firm displayed a very poor customer response through delaying in answering Mr.
Stewart queries and also the failure to pick their customers' calls.
Freedom insurance was guilty of its conduct of being more self-centered than being
customer centered. Freedom insurance was listed as being one of the firms which broke the
accounting standard for one, selling their policies over the phone without considering the health
and mental statue of their customers. The firm was only aimed at making the sale without the
concern of the law of the land. There was a lot of error in the operation of the firm as Mr. Orton
witnessed that there was a great gap of lack of quality assurance for the policies which were sold
over a phone call. Another issue which arose in freedom insurance was downgrading the sale

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practices of selling death policies as well as accident policies. The company had downgraded this
through h selling the 0ppolicies to persons who were not qualified for the policy.
Moreover, freedom insurance was selling their accident death policy to individuals who
had attempted to cancel their existing policy on life insurance. The chairman confirmed that this
sale was deficient as it lacked important information on the policy being sold. Moreover, another
issue that the royal commission found out was that the firm had relegated customer service to a
second position. Moreover, the disciplinary action taken on the agents found guilty of their sale
actions were not held accountable for their mistake neither were they punished or expelled.
Hence the royal commission indicated that the firm was operating below the standards of
operation in the financial market. Moreover, the retention procedure of the company failed below
the social expectations. As there were more than reported cases of disciplinary but the firm
retained the guilty employees.
From the short case analysis, there are a lot of ethical misbehaviors which can be derived
from the case of freedom insurance. First of all, was the sale tactic which the company used. As
a service company which sells on-tangible goods the phone call sale is very unprofessional as
well as unethical. A phone call that was made to Mr. Stewart son and the series of events which
followed after collection of personal information is very unethical. The agent who performed the
sale of life insurance cover to Mr. Stewart son made a mistake by collecting the credit card
number of the customer and he made the purchase on behalf of the customer. Moreover, having
communication phone call the agent failed to collect all the relevant information about the
customer.

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The neglecting of collecting full information o the customer such as his medical
condition or mental condition represents how unprofessional freedom workers were. The second
unethical practice which can be identified in this case is, taking advantage of the vulnerable
customers. There were more than twenty-seven cases which had been reported about the sale of
insurance policy to the disabled person. As a service company or even a goods sale company, all
customers are supposed to be treated similar but in a special case, the vulnerable population
should be treated with special care (Lindorff, and Peck, 2010). The company took advantage f
the vulnerable in society and used them as their tool to increase their revenue volumes.
As the chairman provides evidence, having, made a very critical change in the business
model the firm had failed to publish a well-elaborated document to represent the decision of
abolishing accident and life insurance. The evidence which was corrected from Mr. Orton by the
royal commissioner was more than ninety percent disbelievable as there existed no physical
agreement evidence to prove it. This is very unethical to both the stakeholders as well as the
shareholders of the company. The firm is supposed to treat their customers with the best services
as they are the business first priority, the delay and ignorance with the sake agents of freedom
insurance indicated a gap which existed between the expected conduct to the real conduct which
the employees were involved in.
Moreover, the firm conducted its services in an unethical manner; this is evident through
the evidence provided by the chairman stating that the firm phone calls made lacked a quality
assurance art which is very crucial during trading of services or intangible goods. Moreover,
having received more than twenty-seven cases of employees misconduct and no action had been
affected clearly indicates that the firm had failed in taking disciplinary actions ton its employees.
Business ethics clearly indicates that every person who is found guilty of misconduct should be

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held accountable and also should be suspended or receive punishment for the misconduct.
Freedom insurance on the other, hand acted opposite to the code of ethics whereby the guilty
employees were only warned and shifted from one department to the other. This was quite unfair
and unethical practice by such a firm. Finally, the firm was operating under standards which fell
below the social expectations.
Freedom case was just a representation of the real world practice and operation of
financial firms in the world. This is because several other firms which act almost the same are in
operation in Australia. Both the fact that they are the top performers in the market they are
regarded as clean from unethical behaviors. In the real world, most of the financial service firms
have relegated customer service to position to which is not supposed to be. Moreover this can be
evident from the royal commissioner statement that there was a very big difference in the
rewarding system of the financial service firms in the country whereby he explained his concern
that the agents who receive the highest commission are granted without a consideration whether
the large volume of service and packages sale was done according to the rule. Moreover, the
royal commissioner identified that firms were only in operational for personal gain and not to
offer help to the customers. The case of freedom insurance simply describes the real nature of the
financial service market globally.
Most shareholders are happy about their increased revenue but they do not dig deep to
find out how the revenue was made and hence they are also a great contributor to the increased
unethical behaviors in accounting standards disregard by most firms. Most shareholders only
praise the manages for the increased revenue and fails to pay their attention to customer
satisfaction as well as their complaint and the firms' compliance with the law. From the case of
freedom insurance, it is evident that most of the sale agent contributed to the misconduct and

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unethical practice of the firm. The sales agent were not driven by the quality of service offered to
customers or the level of compliance to the code of conduct guiding the operations of a firm but
rather they were driven by higher yield in commissions gained after the sale of insurance
policies. Hence employees played a very critical role in seeing freedom insurance drown in
unethical behaviors. The employees also failed to follow their signed claim of making sure they
abide by the law and also serve customers with the best service to satisfactory. But rather they
concentrated on generating more income through unfair and illegal sales.
A legal behavior refers to operating according to the set regulations and laws such as
documentation of every agreement made as well as avoiding cheating corruption and misconduct
at the palaces of work. But ethical behavior can be said to be the self-driven behavior which is
capable of controlling a person from doing bad and also compelling a person to do good. Ethical
behaviors are self-driven actions which are according to the society where one operates
(Schmulow, Fairweather, and Tarrant, 2018 pp193-202). Freedom insurance failed if behaving in
an ethical manner as well as behaving according to the rule of the land, this was through ignoring
the set accounting standard s as well as acting against social expectations. Regulators such as
AIC and APRAS can be able to learn much from this case. The first lesson the regulatory bodies
can derive from this case is that, no matter how good an institution may look there is a need for
in-depth research of the compliance of the firm as well as the customer policy of the firm.
Furthermore, the regulatory bodies should be keen on the rewarding, retention and disciplinary
actions the most firms take in cases where need arise. This is because freedom insurance had
been hiding in between other firms with all the misconducts and malpractices the royal
commissioner identified in it and hence regulatory bodies should strengthen their operations as
well as their rules to ensure that firms are complying with the laid down rules.

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This case has brought out several crucial issues which are to be considered before a
person engages in business with any firm. The freedom employees were not trained on hoe w to
deal with their customers, secondly, both the firm and the employees were in a race to gain more
than to help and serve customers. From this case, it can be clear the before e a person make a
decision to deal with a certain firm he should conduct due diligence of the firm to know every
aspect of the firm as well as the mission and vision and the internal behaviors of managers and
employees. The royal commission findings from the case of freedom insurance can be of great
importance as their firm represented just a number of several other firms with the same behavior
(Schmulow, 2017 pp98-107). These findings l will be of great help to the commission in
strategically designing rules and regulation which will be used to govern all the financial
institutions in the country.
Findings from this case will enable the royal commission to give his recommendations as
well as the principles which will be used as a remedy in cases where a case like freedom
insurance arises. For the betterment of the accounting profession, such cases should be applied in
educating the young accountants as well as analysts and auditors for them to have a real-life case
study which they can refer to during making decisions and understanding unethical misconducts
in the accounting field. From freedom insurance case the accounting reporting standards are
degraded as the firm involved itself in several accounting misconducts such as taking advantage
of the vulnerable customers, lack of quality assurance during offering services relegating
customer service to the second position and finally being slow to cater for customer needs and
complains (Comino, 2018).

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PART B
Self-reflective
From my own understanding of the case, I can evaluate freedom insurance as unethical,
illegal and also unprofessional. My opinion on this can be based on several ethical theories
including deontology and equality justice. From my own perspective equality justice refers to the
similar treatment of all and that every good is for all and not for a single group of individuals.
Freedom insurance at the first case designed its sale strategies in an unethical manner and also in
a way that did not respect the ethical justice of equality for all. A phone call cannot be used to
identify a different kind of customers a firm orb a company is operating with and hence this
marked the failure of freedom insurance at the initial stage. Moreover having known that there
exist different kinds of people who may be mentally hand carped or also disabled the company
could have sourced a way out to conduct a free and fair business.
Moreover, the theory of equality justice had lost meaning that the companies as
employees were in a race to chase commission and also the firm was in the same race to seek
improved revenue and customers. From my own perspective freedom had failed in meeting the
community standards and hence had failed in corporate social responsibility as instead of giving
back to the society they were taking more from the society including even the vulnerable. The
case of Mr. Stewart son clearly elaborates this. Moreover, freedom insurance represented the
broad reality which is surrounding most of the banks and insurance firms as well as other firms
in the financial service industry in the nation.
Punishment, retrenchment, and dismissal should be the right actions that are supposed to
be taken to an employee who acts against the set rules and regulations. Freedom insurance was

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indirectly encouraging its employees to continue with misconduct this can be proven through the
sale agent who sold the insurance policy to Mr. Stewart s son and more than twenty-seven cases
similar to that and there was no single action was taken. This shows how reluctant the
management was and how it used to promote fraud as well as unprofessionalism in the
accounting field.
In response to this case, I can recommend the amendment of the accounting standards as
well as the code of conduct which are supposed to be followed by all the firms operating in the
financial service industry. Moreover, I would recommend that regulatory bodies be responsible
in managing and researching on the inner operations of the firm as the problem arises from the
firm management. More so I would recommend for a face to face business when it comes to the
sale of non-tangible goods and services. Face to face business will enable the firm to understand
the kind of a person transacting with and be able to classify him accordingly. Finally, I would
recommend that the royal commission be very strict in banning the operation of companies
which are involved in fraud cases as well as unethical behaviors.

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References
Australia. Royal Commission into Misconduct in the Banking; Superannuation and Financial
Services Industry. 2019. Final Report: Case studies.
Comino, V., 2018. Submission in response to the Intelim Report of the Royal Commission into
Misconduct in the Banking, Supetannuation and Financial Services Industry (Hayne Royal
Commission).
Lindorff, M. and Peck, J., 2010. Exploring Australian financial leaders' views of corporate social
responsibility. Journal of Management & Organization, 16(1), pp.48-65.
Schmulow, A., 2017. The four methods of financial system regulation: An international comparative
survey.
Schmulow, A., Fairweather, K. and Tarrant, J., 2018. Twin Peaks 2.0: reforming Australia’s financial
regulatory regime in light of failings exposed by the Banking Royal Commission. Law and
Financial Markets Review, 12(4), pp.193-202.