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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 powerful misconduct inquiry heard on Monday.
The disclosures at the inquiry, called a Royal Commission, heaps 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.
“Charging premiums for life insurance to someone who is dead, that is the position isn’t it?” said Kenneth Hayne, the former judge leading the inquiry.
Under questioning, AMP’s head of wealth solutions Paul Sainsbury told the inquiry the company’s systems are set up to continue deducting amounts from the pension fund accounts of its deceased customers for life insurance cover, even after it knows 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 for the dead.
While the inquiry was presented with evidence that a staff member had raised concerns over dead client account charges in 2016, Sainsbury said AMP only became aware of the problem in April this year after similar admissions by CBA at the inquiry prompted AMP to launch an investigation.
He said the company is investigating if other types of fees had also been deducted from deceased customers’ accounts.
Sainsbury also said that about A$1.3 million ($930,280.00) of life insurance premiums collected from over four thousand dead customers had yet to be refunded, blaming “record-keeping system” errors.
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.
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 on Monday afternoon, they are down 33 percent since evidence of poor business practices began to emerge in April.
The powerful inquiry, which can recommend criminal prosecutions and tougher regulations, is scheduled to complete its investigation into the insurance sector this week, after having already found widespread wrong-doing in the consumer credit, rural lending, small business banking and pension sectors.
It will hold a final set of hearings in November and will provide a report to the federal government in February that could recommend legislative changes to the financial sector.