The Commonwealth Bank of Australia (CBA) has paid out $7.6 million in compensation to people who were given poor financial advice between 1 September 2003 and 1 July 2012, the bank has revealed.
In 2014, the CBA set up “the most comprehensive review of financial planning advice ever undertaken in Australia” in response to concerns raised regarding past instances of poor financial advice to Financial Wisdom and Commonwealth Financial Planning customers.
Following a senate inquiry in 2014, it was found that “thousands of clients” were “adversely affected” by “the serious misconduct” and “reckless sales-based culture” of financial advisers at Commonwealth Financial Planning Limited.
The bank has acknowledged and apologised for the “unacceptable” behaviour of some of its advisers, and launched an Open Advice Review “to ensure that each case gets the attention it deserves and that [the bank] can put things right where mistakes were made”.
According to CBA’s 2016 annual report, since the program launched in 2014 it has allocated more than 500 people to the program, and offered $7.6 million in compensation across 562 cases (as at the end of June 2016).
The bank has so far issued 4,014 assessments and received around 8,600 review requests.
CBA address CommInsure allegations
As well as revealing the amount of compensation offered to customers under the Open Advice Review, CBA’s annual report also addressed the “recent discovery of poor experiences” by CommInsure insurance customers.
The bank said that it had taken the allegations of unethical and unscrupulous behaviour in its life insurance business “extremely seriously”, adding that the claims made are “completely inconsistent with the culture that underpins the Commonwealth Bank and are not a reflection of the values of our people and business”.
Further, the bank said that all five customer cases (such as a heart attack victim James Kessel, who was denied a $1.1 million life insurance claim due to an “outdated medical definition”) aired by the ABC had been resolved, with three resolved before the program went to air.
Writing in the annual report, CBA chairman David Turner said that the bank had “committed to update [its] policy definitions more frequently to reflect medical advances” and had also “launched investigations into the root causes of the concerns raised, particularly in light of allegations made in the program that these were widespread, and the result of deliberate action”.
Mr Turner said: “To date we have not found evidence to substantiate any of the claims of widespread problems and wilful misconduct.
“These reviews involve well-regarded independent specialists and encompass policy definitions, claims review processes, and other factors such as remuneration and whistleblower practices. We have been working constructively with the regulators on the reviews. The reviews are making good progress, though given the size of the business, and our determination to investigate thoroughly, work remains ongoing.”
Mr Turner added that the bank has appointed professional services firm Deloitte Touche Tohmatsu to “review a sample of life insurance claims declined over the last five years” in a bid to determine whether other past denied claims “warrant further action” and to provide recommendations for any improvements in claims policies and procedures.
Further, the bank has also set up a Claims Review Panel to act as “a permanent and additional layer of assurance” and “ensure transparency and consistency going forward”.
Mr Turner explained: “Where CommInsure recommends that a complex life insurance claim be declined, it will be referred to the panel for independent review and assessment to ensure that the outcomes are fair, balanced and consistent.”
The panel includes four “independent experts”, drawn from the medical, consumer protection, and legal professions.
Despite the recent controversy, the annual report shows that CBA “ranked outright number one for retail customer satisfaction for each month during the 2016 financial year” (in the Roy Morgan Retail MFI Customer Satisfaction survey), “ranked first or equal first in all segments of business customer satisfaction at year end” (according to the DBM Business Financial Services Monitor), and that the bank’s Wealth Management “regained the top spot for adviser satisfaction in April 2016 (in the Wealth Insight Platform Service Level Survey).
CBA CEO Ian Narev said: “Our commitment to putting our customers first extends to making things right if we discover that anything has gone wrong…
“Recent concerns about the experiences of a number of CommInsure customers are also being comprehensively addressed, including independent investigations into the root causes of the concerns raised. To date no evidence has been found that substantiates any of the claims of widespread problems and wilful misconduct.
“To ensure we learn from these experiences, we are making a wide range of improvements to our processes and practices. In addition to the additional levels of independent review and assurance highlighted by the chairman, we will continue to advocate for and participate in industry-wide initiatives that improve practices and customer experiences across the sector.”
[Related: CBA reputation ‘tarnished’: Narev]