AMP charged thousands of dead people for life insurance, the financial services royal commission heard today.
The life insurance giant started looking internally in April this year following reports that the Commonwealth had been charging the dead for financial advice.
However, emails read to the commission today indicted AMP had similar cases of the dead being charged in 2016.
Before the commission today was Paul Sainsbury, head of wealth at AMP, who said the premiums would refunded but that interest would not be paid on that money.
Mark Costello, counsel assisting the commission, asked: “Do you accept that you failed to act fairly and reasonably?”
Sainsbury did not agree.
An internal complaint two years ago flagged the problem charging and then refunding insurance premiums to customers the AMP knew were dead.
Costello said to Sainsbury that it “seems a rather obvious step” to simply stop charging dead people premiums once they’d been notified.
“Yes, it does,” Sainsbury replied, adding that it wasn’t done in 2016 because “the system was coded to refund it when the claim was admitted.”
An internal investigation found 3124 members were charged $922,000 in additional premiums after they had died, despite the insurer being notified of the deaths.
Commissioner Kenneth Hayne: “Charging premiums for life insurance to someone who is dead. That’s the position, isn’t it?”
Yes, that’s they way the system is treating it today for a portion of our business,” Sainsbury said
In one instance, the charging continued for 18 months after AMP was told of the death and on some occasions, refunds were not made when the policy was paid out. .
AMP reported a breach to both ASIC and APRA in June, but told the regulators that the issue was the company’s failure to refund premiums rather than the routine charging of dead people.
The commission also heard that AMP had, as a default standard position, had marked customers as smokers, even if they weren’t, which meant they automatically paid higher premiums.
AMP had admitted knowingly charging customers for advice they didn’t get and of misleading the corporate regulator ASIC.
In July AMP launched a program to repair its reputation and “earn back trust”, by compensating customers for lost earnings, strengthening risk management systems and controls, and cutting fees on its superannuation products.
Last month AMP posted a 74% fall in half year profit to $115 million, driven down by provisions to compensate customers for financial advice they paid for but didn’t receive.
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