The Commonwealth Bank-owned insurer pleaded guilty at the Downing Centre in Sydney this morning to the hawking charges brought by the financial regulator and expects to refund customers by the end of this year.
It owes the huge sum to about 30,000 customers.
The Australian Securities and Investments Commission claims the insurance business made calls that were unsolicited, which was investigated during the royal commission into the banks last year.
The “hawking” charges are the first criminal charges to go ahead following the royal commission after QC Kenneth Hayne recommended banning the practice in the inquiry’s final report.
The corporate watchdog’s case claimed CommInsure, through its agent telemarketing firm Aegon Insights Australia, unlawfully sold life insurance policies known as Simple Life over the phone between October and December in 2014.
CommInsure provided customer contact details to Aegon from CBA’s existing customer database.
ASIC initially flagged a number of issues with CommInsure over the sale of its accidental death insurance, including the fact that almost half the policies sold in 2012/13 were cancelled within six months and that the speed of sales indicated customers could not have made an informed purchase.
CommInsure then identified similar concerns with the selling of more life insurance products.
“ASIC is concerned that the way in which these products were sold was manifestly unfair, with customers given insufficient information to make an informed decision,” ASIC deputy chair Daniel Crennan QC said.
Commonwealth Bank told news.com.au most of the 30,000 customers had already been refunded through its remediation program.
A spokesperson said those who are still customers with the major lender had the money transferred into their accounts while former customers have either been contacted or have had a cheque sent to them.
Treasurer Josh Frydenberg said last month that such criminal charges underlined the gravity of the allegations against the financial sector but said the banks are “critical to the lifeblood of our economy”.
“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.
“This is not to damn everyone in the financial services sector, of course not, this is a very important part of our economy. Indeed, more than 400,000 Australians are employed in the financial services sector and represents about 10 per cent of GDP.”
Hawking is an outdated sales strategy proven to cause harm to Australians who are pressured into buying something they don’t want or need, Consumer Action Law Centre chief executive Gerard Brody said.
“People are being cold-called by companies seeking to force the sale of products which are complex, unsuitable, or even worthless,” he said.
“Cold-calling is a lazy cash cow for the insurance industry and vulnerable Australians are often the primary target of these unscrupulous practices.
“It’s unethical, it’s wrong and it needs to stop urgently.”
The Commonwealth Bank sold off the life insurance business in 2017 to Hong Kong company AIA Group but the Australian bank is liable for any criminal proceedings.
The major bank released a statement this morning the phone sales of the Simple Life product ceased at the end of 2014 and it would not be commenting further on the matter.
The Commonwealth Director of Public Prosecutions is prosecuting the case.
— with AAP