Australia’s biggest listed wealth manager, AMP Ltd, charged life insurance premiums to dead customers even after concerns over the practice were raised by a staff member, a misconduct inquiry heard yesterday revealed.
The disclosures at the inquiry, called a Royal Commission, heaps further pressure on one of the nation’s biggest financial institutions, which previously revealed it had charged thousands of customers for financial advice that 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 the accounts of dead clientele. Commonwealth Bank of Australia and National Australia Bank Ltd, the nation’s No. 1 and No. 4 lenders, have told the inquiry that they engaged in similar practices.
“Charging premiums for life insurance to someone who is dead, that is the position, isn’t it?” said Kenneth Hayne, a former judge who is leading the inquiry.
Under questioning, AMP head of wealth solutions Paul Sainsbury told the inquiry that the company’s systems are set up to continue deducting amounts from the pension fund accounts of its deceased customers for life insurance coverage even after it knows that the people have died.
AMP then refunds the extra charges when the policies are approved and paid.
“Yes, that is the way the system is treating it today, for a portion of our business,” said Sainsbury, replying to Hayne’s question about premiums being charged to the dead.
While the inquiry was presented with evidence that a staff member in 2016 had raised concerns over charges to dead clients’ accounts, Sainsbury said AMP only became aware of the problem in April after similar admissions by Commonwealth Bank at the inquiry prompted AMP to launch a probe.
He said the company is investigating whether other types of fees had also been deducted from deceased customers’ accounts.
Sainsbury also said that about A$1.3 million (US$930,280) of life insurance premiums collected from more than 4,000 dead customers had yet to be refunded, blaming “record-keeping system” errors.
Later this week, the inquiry is to explore whether the insurance industry’s largely self-regulatory regime should continue.
AMP’s reputation has been one of the worst-hit by the inquiry.
While its shares were up 2.2 percent in a broadly unchanged market yesterday afternoon, they are down 33 percent since evidence of poor business practices began to emerge in April.
The inquiry, which can recommend criminal prosecutions and tougher regulations, is to complete its investigation into the insurance sector this week, after having already found widespread wrongdoing in the consumer credit, rural lending, small-business banking and pension sectors.
It is to hold a final set of hearings in November and provide a report to the Australian government in February next year that could recommend legislative changes to the financial sector.
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