The Banking Royal Commission was established in December 2017 after years of public pressure from consumer groups, whistleblowers, the Labor Party, some Nationals MPs, and the Greens. The first public hearing of the Banking Royal Commission began in March 2018, and the hearings are running at irregular intervals throughout the rest of the year.
The main purpose of the commission is to investigate if any of Australia’s financial service entities have engaged in misconduct. To identify if any unfair practices are in place or if any criminal or other legal proceedings should be referred to the commonwealth. Finally, the commission aims to evaluate whether sufficient mechanisms are in place to compensate the victims of misconduct.
So what has been uncovered so far? There has been evidence of shocking behaviour from Australia’s leading banks and financial planners:
- Some of the worst behavior uncovered over the past 10 years includes: forging documents, bribery, mis selling insurance to people who can’t afford it, as well as the repeated failure to verify customers’ living expenses before lending them money.
- In recent hearings, The Commonwealth Bank admitted that financial planners have shockingly been charging fees to clients who have died.
- Furthermore, AMP admitted to lying to regulators, and as a result their CEO became the first high profile casualty after standing down from his position.
- “Flex commissions” is another practice that has been uncovered. The now banned practice has been used for home loans, as well as ad-on services/insurances with car dealerships. One example is ANZ’s car finance business charging up to 24 per cent on car loans up until December last year!
- As a result of the inquisition, ANZ has sold off its Australian operations in life insurance, superannuation, and most of its financial advice arm, alongside various Asian retail banking assets. The strategy has been to offload lower-returning businesses and instead focus on the bank’s core strengths in retail, commercial and institutional banking in order to further cut ANZ’s exposure to wealth management.
So what does this mean for the future of the Finance/Insurance industry? Stay tuned for further blogs discussing the direct and indirect impacts of the Banking Royal Commission on the insurance landscape and on insurance premium funding more specifically.
