ASIC has slugged a major insurer with a $1 million payout after an in-depth investigation found a number of its authorised representatives engaged in misconduct and misled consumers.
ASIC has accepted an enforceable undertaking (EU) from ACE Insurance following an investigation into its brand Combined Insurance, which found some Authorised Representatives (ARs) made misleading statements to consumers and sold them unsuitable insurance policies.
Under the EU, ACE Insurance will implement a remediation plan to compensate affected consumers and make a donation of $1 million to financial counselling and financial literacy initiatives.
“’ASIC’s priority in this significant investigation was the affected consumers, and we have pursued the best result possible for those consumers,” said ASIC Deputy Chairman Peter Kell.
The company will also be required to appoint an independent expert to review Combined Insurance’s compliance systems.
“ACE Insurance is a clear case of how poor culture and conflicts of interest in remuneration have led to poor conduct, resulting in a financial cost to both consumers and the organisation alike,” Kell said.
The investigation found that ACE Insurance contracted salespeople who travelled door-to-door selling and renewing Combined Insurance products, the majority of which were in regional communities across the nation.
Under the EU, ACE Insurance admitted that there had been contraventions of the Corporations Act and ASIC Act, including its requirement to take reasonable steps to ensure its representatives complied with best interests laws.
ACE Insurance has admitted that in the period from 1 January 2012 to 30 June 2014 a limited number of ARs in the Combined Insurance division:
- Sold policies to consumers that duplicated coverage already held by the consumer
- Encouraged consumers to cancel existing policies and take up new policies which resulted in a change of coverage for no benefit, and on some occasions a detriment
- Advised consumers to take up policies under which they would not be eligible for coverage
ACE Insurance further admitted that during this period it failed, in certain respects, to effectively implement a framework to foster and consistently maintain a culture of compliance within Combined Insurance.
Under the EU, ACE Insurance has undertaken not to provide personal advice in relation to Combined products and confirmed it will cease writing new Combined business. The change will not impact existing policyholders.