The Commonwealth Bank’s insurance business, CommInsure, faces a fine of up to $1.8m after being charged with 87 criminal offences for allegedly breaching anti-hawking laws.
In the first criminal case against a big bank following last year’s financial services royal commission, the Australian Securities and Investments Commission has accused the company of hiring a telemarketing firm, Aegon Insights, to cold-call customers and try to sell them a life insurance policy known as Simple Life.
It is understood CommInsure is also accused of failing to take potential customers through the detailed product disclosure statement that sets out the benefits and costs of a financial product.
The hawking laws aim to stop companies forcing useless, costly or inappropriate insurance or other financial products onto consumers, but the royal commission heard they were frequently flouted, with another insurer, Clearview, admitting to breaking them more than 300,000 times.
The commission also uncovered revelations that another CBA division, Colonial First State, committed more than 15,000 crimes by failing to move super customers from high-fee accounts to low-fee ones.
Counsel assisting the royal commission, Rowena Orr QC, said CommInsure may have also committed crimes by misleading customers about trauma insurance coverage of heart attacks.
The company’s use of outdated medical definitions of a heart attack was at the centre of an ABC TV-Fairfax Media investigation in 2016 that helped fuel public outrage and fuelled demands for the royal commission.
The Asic case against CommInsure unveiled on Friday has a much narrower scope. It relates to calls made by Aegon to existing CBA customers between October and December 2014.
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The chief executive of the Consumer Action Law Centre, Gerard Brody, said it had long called for a wholesale ban on cold-calling.
“People are being cold-called by companies seeking to force the sale of products which are complex, unsuitable, or even worthless,” Brody 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.”
CBA is in the process of selling CommInsure to global group AIA as part of a plan by chief executive Matt Comyn to strip the company of its scandal-prone financial advice and insurance arms and return to the core business of taking deposits and making loans.
However, the sales process has been delayed and is not expected to be completed until next year.
A first mention of the criminal charges, which are being prosecuted by the commonwealth director of public prosecutions, has been set for 19 November at the Downing Centre local court in Sydney.
“CBA and CommInsure are considering the matter and CBA does not intend to comment further at this time,” a bank spokesman said.
