SYDNEY (Reuters) - Australia’s corporate regulator allowed an insurer to make a A$300,000 community donation to resolve cases of misleading advertising which could have drawn fines of up to A$8 million ($5.7 million), an inquiry into financial sector misconduct heard on Thursday.
The life insurance arm of Commonwealth Bank of Australia, ComInsure, was also allowed by the regulator to suggest edits to a media announcement about the ads to remove any admission that the company had misled customers, the inquiry heard.
The testimony at the powerful Royal Commission inquiry comes as the Australian Securities and Investments Commission (ASIC) faces growing criticism for failing to rein in excesses in the financial sector.
The inquiry has turned its attention to the insurance industry after rocking the consumer credit, rural lending, small business banking and pension sectors with allegations of misconduct.
ComInsure was questioned on Wednesday about allegations that it relied on outdated medical definitions to avoid paying out claims.
At Thursday’s hearing, ComInsure was asked about ASIC’s handling of a series of advertising pamphlets which the regulator said were misleading because they suggested the insurer would offer coverage for all types of heart attacks.
The potential fines for the pamphlets totalled A$8 million, the inquiry heard.
However, ComInsure’s executive general manager, Helen Troup, told the inquiry the regulator had asked in a series of 2017 emails if a A$300,000 “community benefit payment” would resolve the matter, and the insurer agreed.
“We would have taken the approach of continuing to defend our position, so this was alternative,” Troup said.
Kenneth Hayne, the retired judge running the Royal Commission, asked if Troup considered the payment a sufficient punishment.
She replied: “I think we felt that the A$300,000 community benefit payment was a form of punishment.”
Troup said she did not remember how the A$300,000 figure was arrived at. When Hayne asked if the amount seemed small, Troup replied: “That’s probably for other people to judge.”
ASIC had wanted its media release to say that ComInsure agreed with ASIC’s concerns that it had engaged in misleading or deceptive advertising, Troup said.
But ComInsure gave alternative wording to remove any suggestion that it accepted the complaint, she said.
“Our position at the time was that, as we acknowledged ASIC’s concerns, we didn’t entirely agree with them,” Troup told the inquiry.
“We were still defending our position ... but sitting here today ... I can see how ASIC’s concerns were legitimate,” she said.
CBA sold its life insurance unit to Hong Kong-based AIA Group for $3.1 billion last year, but the sale is still to be completed.
The inquiry continues.
($1 = 1.3910 Australian dollars)
Reporting by Paulina Duran and Byron Kaye; Editing by Darren Schuettler