New Zealand Markets open in 1 hr 31 mins

Freedom flags up to $4m in remediation

Aditya Soni

Freedom Insurance Group says it may face a liquidity shortfall in 2019 with $4 million in customer remediations and no new business commissions sending its stock to a fresh low.

The beleaguered firm, whose shares have fallen more than 88 per cent this year, stopped new business sales of all direct insurance products in October following damaging revelations at the Royal Commission.

The NSW-based insurer expects to make a provision between $3 million and $4 million in its financial accounts for the period ending December 31.

The timing of payments of commission clawbacks coupled with lack of commissions from new business sales may lead to liquidity concerns, Freedom said in a statement on Thursday.

The company's board completed a strategic review to examine its business structure according to the Australian Securities and Investments Commission's review of the insurance industry.

However, it added that the "board remains satisfied that the company is solvent, based on the funding, efficiency and business restructuring options available."

Freedom was hit by the revelations of widespread misconduct, including selling an insurance policy to a man with Down Syndrome who did not understand what he was doing, raising questions about the company's direct sales method.

The firm then refused to accept a request by the man's father to immediately cancel the policy.

Battered by the findings, the insurer said in October it would slash its headcount by over 60 per cent to 90 employees, in line with reduced business activities.

Shares of Freedom were trading 49.1 per cent lower, in a weaker overall market.