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An embattled wealth management giant has admitted its failure to act in the best interests of its customers, after some of its financial planners engaged in so-called insurance “rewriting” or “churning”.
AMP has settled a federal court action over the practice of advising clients to cancel their existing insurance policies to be replaced with new ones, in order to generate higher commissions, exposing these clients to underwriting risks.
The Australian Securities and Investments Commission (ASIC) alleged AMP breached its obligations under the Corporations Act, claiming AMP should have known about the rewriting conduct, which occurred between 2013 and 2015, and that it failed to adequately deal with the problem.
“ASIC’s case argued that AMP, one of Australia’s largest financial institutions, failed to ensure its financial planners acted in the best interests of their clients as well as other contraventions of the law,” said Daniel Crennan, ASIC deputy chair, in a Brisbane Times report. “AMP has now admitted to all of these contraventions and ASIC will ask the court to make declarations of contravention and order AMP to pay a penalty.”
A two-week hearing will be held in June to determine a penalty for AMP. When the case was launched, ASIC said breaches of this type could attract a maximum penalty of $1 million for each contravention.
An AMP spokeswoman said the company has enhanced its monitoring and supervision to ensure clients are protected from this type of behaviour.
“AMP has been cooperating with an ASIC investigation of the matter, which commenced in 2014 shortly after AMP terminated the financial adviser at the centre of the matter and reported him to the regulator,” the spokeswoman told Brisbane Times.
