September 17, 2018
AMP has told the Banking Royal Commission that it deducted life insurance premiums from the superannuation accounts of people who have died, even when notified of the person’s death, and repaid the premiums from the death benefit.
The admission was made by AMP Group Executive – Customer and Wealth, Paul Sainsbury under questioning from Counsel Assisting the Commission, Mark Costello who established the deceased were members of AMP Superannuation and the life insurance was provided by AMP Life.
The Commission was told the practice affected 4,645 customers and collected $1.3 million in premiums, and was first identified in 2016 but was not addressed within AMP until April 2018. After that time it was referred for an internal review in June 2018, as well as being reported to ASIC and APRA as a breach.
Responding to why there was a delay before launching the review, Sainsbury said, “There’s quite a lot of history in this particular matter, in the sense that it’s quite complex, and it goes back a number of years, and in order to quantify the size and the extent of the issue, it was necessary to do a fair bit of investigation, and that investigation takes time”.
Costello also asked why the problem had not been addressed in 2016, despite emails from AMP staff at that time questioning if the practice was appropriate.
Sainsbury agreed that stopping premiums being charged upon notification of the death of a fund member should have taken place but rather “…the system was coded to refund it when the claim was admitted”.
He added there was a difference between events in 2018 and 2016 because “…the breach in this year was because the amounts entitled to the member or to the estate were not refunded”.
“Whereas the issue in 2016 was not that they weren’t refunded, it was just that they were refunded at a different time and we should have stopped deducting them on notification of death,” Sainsbury said.
He also noted the April 2018 review was a result of the Commonwealth Bank being questioned on premiums being charged to deceased superannuation fund members.
“A question was asked inside AMP ‘could this happen to us’, and that gave rise to a review, which identified the issues that were the subject of the breach report,” Sainsbury said.
He also conceded the practices were conduct falling below community standards and expectations and AMP did not act efficiently, honestly and fairly by charging premiums in those circumstances.