Anti-hawking in financial services: Some observations on multi-product discounts

For some time now, the issue of whether a sales representative can cross-position different insurance policies or financial products through the mechanism of a multi-policy or multi-product discount has been somewhat of a vexed issue – to say the least.

In this context, we are referring to a scenario where a client makes an enquiry about Product A (or an outbound call concerns Product A), but there is a desire on the part of the relevant financial institution to cross-position other products, to the extent that this is legally achievable and compliant.

Of course, at one level, the reason that this has been a vexed issue is because the new anti-hawking regime was designed to prevent or impede so called cold-call cross-selling. On the one hand, offering a client Product B, when the scope of the interaction otherwise is related to Product A, has been seen traditionally as infringing the anti-hawking prohibition. On the other hand, an interaction which is centred around Product A can legitimately extend to Product B if Product B is within the scope of the client’s consent – at least where that consent is freely given and has been unprompted by the sales representative.

But what is the situation where the client asks about and receives a quote from the sales representative in relation to Product A but, of their own accord, enquires whether there is any way the sales representative can provide a cheaper quote?

Most legal observers have felt that the sales representative could respond by just informing the client of the existence of a multi-policy or multi-product discount, but it is probably fair to say, felt the sales representative was restrained from effecting any sale of Product B in the same interaction. The opportunity, however, for a greater cross-positioning opportunity, on the same interaction, could come through the concept of evolved client consent which we have discussed in our previous articles.

More specifically, if the client can be informed of the multi-product discount (which we think can occur in the scenario we have outlined, as the sales representative is simply responding to a client enquiry), can the sales representative provide a quote for Product B if that is integral to the concept of providing a cheaper quote on Product A? The answer probably lies in the scripting of the interaction and of course, how the client responds when informed of a multi-product discount.

It seems to us that this will depend on the cadence of the interaction. If after the multi-product discount is mentioned, the client initiates the next element of the sales interaction, then in our view, this would fall on the right side of the line due to the evolving client consent concept and therefore on the better view, would not fall foul of the anti-hawking regime. If the sales representative offers further information, such as by asking the client if they would like to understand more about the multi-product discount, this may still be permissible, depending on the circumstances. However, it falls more into a shaded area if the sales representative immediately asks if the client would like a quote on Product B. This seems to go too far.

At this stage, it is instructive to see how ASIC views these interactions. The updated ASIC Regulatory Guide 38 The anti-hawking prohibition (RG 38) addresses what we originally called the concept of “evolved consent” in [83]:

A consumer may raise a second or additional product of their own accord in the course of a contact. Provided this is done entirely of their own initiative, and the consent meets the criteria of being positive, voluntary, clear, and capable of being reasonably understood, then the offeror is able to make offers in respect of the second or additional product. We consider this to be consistent with the object of the regime which is to give consumers greater control over their decisions to purchase financial products: see paragraph 5.4 of the Explanatory Memorandum.

ASIC notes, however, that the representative must not elicit a client’s consent in any way, such as by asking leading questions.[1] ASIC then goes on to specifically address the multi-product discount issue:

Where an offeror wishes to provide a discount to a consumer for acquiring or holding multiple products, or the consumer enquires about the availability of such discounts, the offeror needs to consider whether any products raised in the context of the discount conversation are within the scope of the consumer’s consent. If they are not, the offeror will not be able to make an offer, request, or invitation in respect of those products.[2]

ASIC is quite categoric about the inability of the sales representative to rely on evolving consent which is elicited by the representative:

Offerors cannot rely on consent that they may have elicited in the course of explaining the discount as a basis for making offers, requests or invitations in relation to any additional products. This does not prevent an offeror from providing information about those products, so long as no offer, request or invitation in relation to additional products is made, and the consumer is left to consider whether they wish to recontact the offeror.[3] (emphasis added)

The example that follows provides an illustration of ASIC’s stance:

Example 25: Multi-policy discount

Frankie calls an insurance company, Insurance Assistance, to get a quote for comprehensive car insurance and speaks with an agent, Emma.

After receiving her quote, Frankie tells Emma that she was hoping for something cheaper and asks about the best price that Insurance Assistance can offer.

Emma asks if Frankie might be interested in a multi-policy discount and explains that if Frankie has three eligible Insurance Assistance policies, she will receive 15% off each policy.

Frankie is interested in the multi-policy discount and provides her email address.

Emma sends Frankie an email after the phone call that includes information on comprehensive car insurance, eligible Insurance Assistance policies and a brochure explaining the multi-policy discount. The email also includes Emma’s contact details. Frankie ultimately decides only to take out comprehensive car insurance. Frankie may still be eligible for the multi-policy discount if she applies for additional products later.

By only providing Frankie with information, as well as time to consider her options and the freedom to re-initiate contact, Emma has not breached the hawking prohibition. If Frankie opts to contact Emma and purchase further insurance products, this contact would not be ‘because of’ the prior discussion of the discount.

But consider if, instead of merely expressing interest in the multi-policy discount and providing her email, Frankie asks off her own bat to acquire the additional product/s .It seems to us that this consent is not elicited by the representative (as the mention of the multi-policy discount is in response to a client enquiry) and accordingly, should be capable of being relied on – subject to appropriate scripting around the client interaction, and ensuring any further discussion and implementation of a multi-policy discount is client-driven. However, this does not appear to be the regulatory position.

In summary, more latitude may exist in the wake of revised RG 38 than previously was thought to be the case, but as usual, having the regulator on board with this position would be the optimal pathway.

[1] ASIC Regulatory Guide 38 The hawking prohibition at [84].

[2] Ibid at [96].

[3] Ibid at [97].