CommInsure & AMP could face criminal charges

Commonwealth Bank of Australia, AMP and Allianz may have committed criminal offences in their treatment of insurance customers, the Royal Commission has heard.

In the last round of hearings before the inquiry’s interim report is handed to the government, counsels assisting the commission said CBA’sinsurance arm, CommInsure, may have committed a criminal offence when it misled and deceived customers in its advertising about trauma cover, particularly for heart attacks.

AMP was also recommended for potential criminal charges because it failed to confess to the corporate regulator within 10 days that it had charged life insurance premiums to clients it knew were dead.

Allianz Insurance may have also made a criminal breach of the Corporations Act for failing to notify its ASIC of misleading statements on its website withint 10 business days.

Rowena Orr QC, one of two silks assisting the commission headed by former High Court judge Kenneth Hayne said CommInsure had made a criminal breach when it claimed in advertisements that its life insurance covered heart attacks when it did so only in very limited circumstances.

She said it was open to the commission to find that CommInsure had breached section 12d(b) of the Australian Securities and Investments Commission (ASIC) Act, which can be a criminal offence.

Orr said CommInsure had also made civil breaches of the Corporations Act and the ASIC Act, including misleading customers and had made misrepresentations to the Finanical Ombudsman Service including withholding details about a customer’s severe heart attack so he would not be able to claim.

AMP notified ASIC that it had failed to refund $1.3 million in premiums to 4645 clients who it knew had died this year despite knowing in 2016 that it might be in breach of the law for charging dead clients life insurance fees. AMP’s decision to charge non-smokers the same premiums as smokers if they had not specifically declared they were non-smokers could be a civil breach of the Corporations Act, the commission heard.

Orr said life insurance giant TAL breached its legal obligations in a “systemic” way, “It is open to find that TAL engaged in misconduct in a number of respects.”

Citing two case studies where TAL aggressively sought to avoid paying out mental health claims to customers, she said that the insurer might have breached an obligation to act in the “utmost good faith” to clients.

The commission also released a series of findings against insurers Suncorp and Youi over claims handling processes for natural disasters.

It was also open to the commission to find that Suncorp’s AAI insurance arm misled and deceived AAMI customers when it said in its advertisements that it would cover any repair, no matter the cost, despite often offering to resolve claims with cash settlements below the cost of repairs that its customers could access.

The commission also recommended that Suncorp’s AAI made several breaches of the General Insurance Code of Practice when dealing with a claim by the Heald family whose house was severely damaged in wild storms in the Hunter Valley in 2015.

Insurer Youi engaged in misconduct in its handling of two natural disaster claims that involved extensive delays in repairing customers’ homes, a closing submission suggested.

The submission also said the handling of these claims – including one where a pregnant woman and her family were forced to temporarily live in a caravan because their house was made uninhabitable – breached the insurance code of conduct and a legal duty to act in the “utmost good faith” towards customers.