Freedom Insurance Share Price Struggles to Recoup from Yesterday’s 27% Drop

Freedom Insurance Group Ltd [ASX:FIG]’s share price is up by 2.06% today — a surprising and positive bounce back after yesterday’s devastating drop of 27%. Of course, there is still a long way to go for the company to get back on track.

The decrease came following the announcement that the Insurance giant was to halve its workforce and drop all new sales, according to the ABC.

The stock is currently trading at $0.099, at time of writing.

The company came under the fire of the royal commission this year due to its aggressive sales tactics, high commissions and cold calling. With all new business ceased, the future of Freedom is now uncertain.

Despite a positive increase today, the company has still lost 80% of its value this year.

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What can we expect next from Freedom Insurance?

It’s not looking positive for Freedom. After the royal commission inquiry, extremely detrimental allegations have come out regarding the practices of the company.

The decision to cut Freedom’s workforce by 50% is hoped to decrease operating costs by at least $15 million, offset by $4.8 million in restructuring costs, including redundancy payments.

Freedom’s chief executive Keith Cohen will also be replaced by Craig Orton — who represented the company during the royal commission investigations.

But one of the more shocking practices came out in the form of a recorded phone call — in which a sales representative sold accidental death insurance to a man with Down syndrome. This ‘downgrading’ sales practice, where accidental death cover was pushed onto customers who had been previously rejected from comprehensive life insurance policies, was one of the more concerning tactics revealed during the inquiry.

The father of the man, Grant Stewart expressed how distressing the phone call was to his son, in which he was pressured into the plan by believing he had done something wrong.

But Freedom insisted — upon hearing the playback of the phone call — that the salesperson should be the one responsible, not the company itself.

Regardless, these accusations have tarnished Freedom’s reputation and validity, and will need to address these issues promptly.

Whilst the company is still operating for existing policies and customers, without a new business model, its hard to see where Freedom Insurance will end up in the future.

Regards,

Ryan Clarkson-Ledward,

For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

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