(Sydney) REUTERS: An Australian unit of German insurer Allianz SE sold travel insurance that misleadingly promised unlimited emergency medical cover wherever people were even though the policies had limits on both cost and location, a misconduct inquiry heard yesterday.
The Royal Commission, which can recommend criminal prosecutions and tougher regulations, is now investigating the insurance industry. It has already found widespread wrong-doing in the consumer credit, rural lending, small business banking and pension sectors.
The inquiry heard that Allianz’s website led people to believe the firm offered unlimited cover for emergency medical services overseas, when in fact the cover had a A$1,000 (US $ 715) limit and that cover applied wherever they travelled, when there were restrictions on locations covered.
Under questioning, Allianz General Manager Retail Distribution Michael Winter said it had misled clients who purchased travel insurance products through its website.
The policies had been sold on Allianz’s website since December 2015 and, even though the firm’s solicitors raised concerns about the advertising claims at that time, were only removed earlier this year.
Documents submitted at the inquiry showed Allianz declined a suggestion by its solicitors to spend up to A$30,000 in a thorough review of the whole website.
“This is demonstrative, I want to put to you, of Allianz not prioritising compliance and compliance with the law,” said Rowena Orr, a lawyer assisting the inquiry and Winter agreed.
“At Allianz, it’s more important to protect the bottom line than to stop misleading your customers,” Orr said.
“In this instance, yes,” Winter said. “I don’t think it’s more important to protect the bottom line. I think it should absolutely be more important to protect the customer.”
Allianz told the corporate regulator in August that it had sold over two million travel insurance policies during the period from December 2015 till June 2018, including about 10 percent through direct sales. It told the inquiry yesterday it had not yet contacted affected customers about any remediation.
Earlier, Australia’s biggest listed wealth manager AMP Ltd said it had charged life insurance premiums to dead customers even after concerns over the practice were raised by a staff member.
AMP’s disclosures heaped further pressure on one of the country’s biggest financial institutions which previously revealed it had charged thousands of customers for financial advice it never gave, then doctored a supposedly independent report to the corporate regulator about it.
AMP is not the only major Australian company to admit to charging dead client accounts. Commonwealth Bank of Australia and National Australia Bank Ltd, the nation’s No.1 and No.4 lenders, have told the inquiry they engaged in similar practices.
AMP’s shares finished 1.9 percent higher yesterday in a broader market that gained 0.3 percent. But they are down about 30 percent since evidence of poor business practices began to emerge in April.
The insurance sector is loosely regulated in Australia with no formal regulator. Australia’s regulators have come in for criticism at the inquiry and are under pressure to demonstrate they are reining in the finance sector amid daily revelations of misconduct by firms.
Later this week, the inquiry will explore whether the insurance industry’s largely self-regulatory regime should continue.