Recompense For 'exploited' Blacks
Sydney Morning Herald
Thursday March 11, 1993
CANBERRA: Mercantile Mutual Life has been forced to compensate 330 Aboriginal customers to whom it sold life insurance, after a Trade Practices Commission investigation criticised its "exploitative" marketing methods.
The commission found that Mercantile Mutual had breached the Trade Practices Act while selling the policies, through an agent, to Aborigines in the Northern Territory.
Professor Allan Fels, the chairman of the commission, said: "Most of these people were exploited - they did not know what they were buying.
"The agent made lavish promises that they would receive big sums at the age of 55 or if they were injured."
He said Mercantile Mutual had neglected to provide even the most basic of information to the customers.
Mercantile Mutual had been aware, from head office down, of two earlier cases where life offices had exploited Aboriginal consumers, but had marketed the policies anyway.
"This is the third time in a year that the TPC has snared a life office for using very poor sales techniques (while) selling (life policies) to Aborigines in northern Australia," he said.
The two earlier cases saw Colonial Mutual Assurance and Norwich Union prosecuted.
Professor Fels said the case highlighted the need for stronger protection of "less financially sophisticated" consumers when they were buying life insurance and superannuation products.
He said fresh investigations by the commission of other life companies, which appeared to have exploited ethnic groups in Sydney and Melbourne while selling life policies, offered a similar warning.
"We are looking at some potentially significant cases of insurance sales to unsophisticated customers," he said.
"We will not allow the rights of disadvantaged groups, communities or individuals under the Trade Practices Act to be ignored."
The commission tabled a report last year recommending stricter disclosure and information standards in the superannuation and life insurance industry, one of the most baffling areas for consumers.
Its report is being considered by the Government.
After admitting to "misleading, deceptive and unconscionable conduct" in the Federal Court in Darwin, Mercantile Mutual agreed to refunds on policies to all of the 330 customers who wanted to be reimbursed.
It also agreed to pay the customers interest of 7 per cent on the amounts of their policies, and to reimburse the commission itself for the costs of the investigation and court case.
The commission obtained a Federal Court injunction allowing it to levy heavy fines against Mercantile Mutual if the latter engaged in "misleading, deceptive or unconscionable" selling to Aborigines in remote locations within the next three years.
Professor Fels said the penalties for which the company would be liable under the injunction were far more than penalties which would be applicable under the Trade Practices Act.
He said any attempt to seek additional damages through the courts would have led to protracted legal proceedings, and may have "led to trauma for individual consumers".
Meanwhile, Professor Fels said he was not worried by the Coalition's proposals for a more powerful Competition Commission to take over from the commission.
That proposal was "a fair way down the track," and he welcomed the emphasis from both sides on competition policy in the election campaign.
© 1993 Sydney Morning Herald
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