Westpac to Face Class Action Over Premiums

Consumers who received life insurance advice from a Westpac aligned financial adviser and purchased a policy based on that advice have been encouraged to join a class action which claims the bank overcharged clients for their life insurance premiums.

Shine Lawyers Class Actions Special Counsel, Jan Saddler

Shine Lawyers Class Actions Special Counsel, Jan Saddler

The action, which has been filed by Shine Lawyers in the Federal Court of Australia, could result in a total claim of $100 million.

Shine Lawyers stated the action will allege the Westpac Banking Corporation charged clients of bank-based advisers 4.5 percent more in premiums than for the same life insurance product when recommended by a non-aligned adviser.

Shine Lawyers Class Actions Special Counsel, Jan Saddler said the higher premiums had been charged since 2010 and the action would seek to return the overpaid premiums and any interest or profits made from investments.

“We believe that Westpac took advantage of its relationships with customers to boost its bottom line…”

“We believe that Westpac took advantage of its relationships with customers to boost its bottom line, by signing clients up to their own in-house insurance which they knew was more expensive,” Saddler said.

“The bank and its financial planners have an obligation to act in the best interests of their clients. In this case Westpac has abused its powers and the trust of customers,” Saddler added.

BT Financial Group (BTFG), which provide life insurance products to Westpac, has stated it will be “…defending legal action in relation to its Life Insurance products” and defended its pricing model across different sales channels.

BT Chief Executive, Brad Cooper, said the various sales channels employed by the bank had different services levels and underwriting processes which impacted pricing.

BTFG Chief Executive Brad Cooper

BTFG Chief Executive Brad Cooper

He said BT aimed to make insurance widely affordable and spread the risk of claims across all customers and “…this means that some customers who come through Westpac will get insurance at a lower price than if they went through a different adviser”.

“Through our Financial Planners we accept customers who may have conditions such as high cholesterol or blood pressure and who would otherwise find themselves with a higher premium if they tried to purchase it through an independent adviser,” Cooper said.

“As a result, some customers will pay substantially less, and others will pay a little bit more, but that is how insurance works,” he added.

“…some customers will pay substantially less, and others will pay a little bit more, but that is how insurance works…”

Former adviser and insurance industry specialist, Brian Boggs told Riskinfo he had seen Statements of Advice and Product Disclosure Statements from Westpac bank-advised clients which did not mention the difference in premiums.

Boggs also claimed the advice failed to meet Best Interest Duty requirements in that only one in-house product was considered when providing the advice through the bank channel.

Shine Lawyers stated Westpac customers may be entitled to join the action and recover compensation if they received financial advice from a financial adviser of Westpac, BT, St George Bank, Bank of Melbourne or BankSA; and obtained a life insurance policy from one of those organisations as a result of that advice, since 2010.

  • Chris Lucas

    So, I can buy a bottle of wine cheaper at Dan Murphy’s than I can at the cellar door, should I be suing the wine maker?

    • Ken

      I agree it’s a bit over the top !! I’m certainly not a fan of the banks but this bank bashing is just become a cavalcade of greedy clients led by money Hungry lawyers

      • BKY

        Yep greedy money hungry lawyers. So does this mean if one Adviser chooses to dial down commissions for a particular client, then does this give other clients the ability to sue other Advisers who don’t…I mean where does it stop? The more interesting comment is from BT’s Brad Cooper who states that Westpac clientsay not be charged for having high cholesterol or BP…no wonder life companies blame bad claims experience as the excuse to increase rates. When are life companies going to listen to the highly paid actuaries…standard rates are standard rates…you know for standard risks. It’s not rocket science.

      • Katherine Hayes

        What this particular article didn’t mention though is that Westpac’s clients were being told they were getting a discounted rate due to their home loan package etc so they were getting it 5% cheaper. Though the 5% discount was being applied… it was only after they’d loaded it by 10%. That is why it was so dodgy.

  • Brett

    I can hear the can of worms opening!!!!
    3rd party providers all over the country charge higher premiums to get their cut. E.g. RAC insurance uses AIA but adds 30% to make a buck. Most non life companies are simply adding margins to Life co’s existing products and premium structures.

  • Simon

    Its worthwhile that ASIC look at this plus general insurance. Some general insurance providers have different prices for different retailers. The price of a home insurance with one bank will be different to another, but its the same insurer?

  • Reality Check

    For once I am in agreement with a bank! Of course prices will differ across channels and generally an independent adviser will get the customer a better price because they are taking on much of marketing costs and the work the insurance company would have to do themselves.
    The problem with parasite class actions is that even if they do win its a lose lose for the customer. They will take the big chunk of any settlement and the insurers will increase premiums across cheaper channels to compensate so nobody wins (except the parasites!)
    You can bet the banks and insurers will be watching this class action with panic.

  • TB

    I can’t see Shine Lawyers winning this one but if they did want to look at a class action on behalf of Risk advisers against the FSC I think they would be onto something. We have ASIC refusing to release how they came about creating a churn issue and then admitting that post LIF there isn’t one and then we have the FSC who falsely represented data and acted to push for the LIF.
    Imaging 25000 advisers who may lose an average of $30,000 each in income and you have a substantial profit grab by the FSC members which ultimately is bad for customers.

  • KS

    Pretty sure this extra premium essentially meant that some loadings (<75% on lumpsum) were waived. This would slightly alter the contract and they would have the right to charge more across the board because of it