Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is turning its scrutiny to the insurance industry.
If the royal commission ends up being extended, which Prime Minister Malcolm Turnbull had alluded he was open to, the insurance industry is likely the next target of its investigations, an editorial by ABC said.
The Australian Securities and Investments Commission (ASIC) recently targeted AMP’s insurance business, which is being hounded by allegations of tolerating its financial planners’ misdeeds.
According to the accusations, for at least two years prior to 2013, AMP knew about its financial planners’ churning their clients’ insurance policies. These involve selling various insurance products, to clients, without regard for the clients’ best financial interests, in order to earn more from commissions.
Strangely, the insurance industry has been mostly overlooked, with much of the public ire vented at the wealth management sector.
The fall of Catherine Brenner, ex-chair of AMP, was facilitated by an “independent” report into overcharging by financial planners, produced by the Clayton Utz law firm for ASIC. Brenner and AMP were found to have meddled with the report in an attempt to mislead ASIC.
Recently, several insurers have engaged law firms and investigators to deliver similar reports, the editorial said, adding that the insurance industry is wary of the damage their internal investigations would cause if they went public.
The reports include details of denied life insurance claims, car insurance add-ons sold to those who couldn’t afford them, disaster insurance sold to homeowners with ineligible properties, income protection to unemployed individuals, and other irregularities.
AMP and the big four banks are said to be behind most of these, and these banks are aware that their insurance arms could be next under the microscope.
In September, Commonwealth Bank sold its insurance business for $3.8 billion, months before it decided to dispose of its mortgage broking, funds management, and financial planning assets.
“Australian banking is in the midst of a radical overhaul — the biggest since deregulation in the 1980s, as the main players scramble to avoid the gaze of the royal commission. Contrition has become the financial fashion du jour,” said ABC.
