Published 31 Oct 2018
Faith in the financial services industry was rocked in 2008 when widespread irresponsible banking practices led to the biggest global economic crisis since the Great Depression.
Australia escaped the worst of the downturn, but financial services was still the least trusted sector in the country last year, according to a Yell Creative and YouGov survey. Unfortunately, findings from the recent banking royal commission will only have reinforced the general public's scepticism.
Perhaps the biggest scandal of the investigation was a rumour that financial services giant AMP continued to charge life insurance premiums to customers who were already dead. Let's take a look at how the events unfolded during the commission's public hearings.
Misconduct at AMP brought to light
Paul Sainsbury, head of wealth solutions at AMP, admitted under questioning that the company's systems are set up to continue charging premiums on dead customer's accounts, even after the firm is aware the person has died.
More than 4,600 superannuation members are known to be affected, although Mr Sainsbury admitted the number of cases could be much higher. He blamed system errors for the failure to stop taking premiums from members' accounts, with the total amount charged to dead customers thought to exceed $1.3 million.
The firm notified the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority of a breach in June this year after consistently failing to refund charges upon learning of a customer's death.
A bad year for AMP
AMP's reputation was already in tatters before the life insurance scandal. Earlier in the year, the royal commission had already revealed the company's habit of charging customers fees without providing any services, including financial advice.
Furthermore, AMP had allegedly misled ASIC approximately 20 times in two years regarding the extent of fees-for-no-services practices. The revelations, which came to light in April, led to the resignations of Chair Catherine Brenner and Chief Executive Craig Meller.
The company also saw $2.2 billion wiped off its market value in a two-week spell following the commission's findings. In July, AMP launched a $615 million damage control plan and warned shareholders to lower their profit expectations.
Have you been affected by life insurance misconduct?
The royal commission uncovered various wrongdoings in the life insurance and superannuation industries. This included multiple instances of insurers rejecting legitimate claims on TPD, critical illness and income protection policies.
Greater regulatory scrutiny and improved consumer protection measures may be on the horizon for financial services industry. However, if you need support today, please contact Gerard Malouf & Partners Superannuation Lawyers for more information on how we can help you challenge a rejected claim.