| 05.10,19. 05:02 AM |
CBA faces criminal charges over CommInsure scandal
Photo: CommInsure has been sold by CBA, but the bank is liable because it owned the insurance arm at the time. (ABC News: Margaret Burin)
Australia's largest bank is facing 87 criminal charges over unscrupulous practices in its life insurance arm — the first major bank to face criminal charges following the banking royal commission.
Commonwealth Bank's insurance arm CommInsure has been charged with "hawking" for trying to sell insurance products through unsolicited phone calls.
The Australian Securities and Investments Commission (ASIC) alleges that between October and December 2014, CommInsure, through its agent telemarketing firm Aegon Insights Australia, unlawfully sold life insurance policies known as Simple Life over the phone.
CommInsure provided customer contact details to Aegon from CBA's existing customer database.
ASIC alleges that the calls to CBA customers were unsolicited, and that CommInsure did not comply with all of the hawking exceptions in section 992A(3) of the Corporations Act.
CommInsure has been sold by CBA, but the bank is potentially liable because it owned the insurance arm at the time.
The maximum fine is about $1.8 million, ASIC said.
CBA said in a statement that the bank self-reported the matter.
"The alleged contraventions relate to telephone sales of Simple Life insurance products by CMLA in the period 7 October 2014 to 16 December 2014, a practice that ceased at the end of 2014," CBA said in a release to the Australian Securities Exchange.
"CMLA reported breaches of anti-hawking provisions to ASIC. CBA and CommInsure are considering the matter, and CBA does not intend to comment further at this time."
The case is listed for first mention in court on November 19 at the Downing Centre Local Court in Sydney.
ASIC said it would not be making ay further comment.
Treasurer says banks need to face full force of the law
Treasurer Josh Frydenberg said the case highlighted bad conduct by the big banks uncovered at the royal commission.
"Obviously these are independent regulators who have collated the evidence, and that will play out before the courts. But it does underline how serious the allegations have been against some of those in the financial services sector," he said.
"Where there is inappropriate behaviour, indeed, where there is criminal misconduct, then those people who have perpetrated that misconduct need to face the full force of the law."
The Hayne royal commission heard CBA routinely ignored the medical advice of its own employed doctors, including its chief medical officer Dr Benjamin Koh, who blew the whistle on the company's misconduct as part of a joint investigation by the ABC's Four Corners and Fairfax in 2016.
That investigation revealed CommInsure used outdated medical definitions, leading to some claims being rejected despite customers having suffered heart attacks.
ASIC undertook an investigation into CommInsure's practices, but in March 2017 ultimately found that while the insurer should have treated its customers better, it had not broken the law.
In September 2017, Commonwealth Bank sold its troubled life insurance arm to Hong Kong-listed AIA Group for $3.8 billion.
During the royal commission, counsel assisting Rowena Orr said CommInsure may have breached laws by making false and misleading statements about coverage for heart attacks.
Ms Orr also said it was open to find that CommInsure may have committed misconduct in the claims handling process.
Ms Orr said there were numerous instances where the evidence supported a conclusion that CommInsure's conduct fell below community standards and expectations, and that the insurer's behaviours "indicate a troubling lack of respect" on the part of CBA for the Financial Ombudsman Service (FOS).
The commission heard that CommInsure withheld information from the FOS during its investigation of a customer complaint.
FOS formed the view that CommInsure's actions may amount to "serious misconduct", but CommInsure disputed this at the time.