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RC questions whether CBA ‘swept aside’ insurance problem

Australia’s largest bank has been interrogated by the financial services royal commission for its tardy reporting of issues concerning its mis-selling of home loan insurance.

The Commonwealth Bank’s (CBA) executive general manager of retail products, Clive van Horen, fronted the commission on Monday (19 March) to address questions regarding the bank’s reporting of errors found in its selling of loan protection products (LPP).

In October 2015, CBA made changes to its LPP application process, after discovering that a lack of disclosure surrounding eligibility criteria, which prevented credit card insurance (CCI) customers from claiming on the insurance, was also evident in its Home Loan Protection (HLP) and Personal Loan Protection (PLP) products.

However, it was revealed that the major bank only reported the issue to the Australian Securities and Investments Commission (ASIC) in 2017, two years after the errors were discovered.

“In October 2015, did CBA know that the same problem that had arisen for CCP customers [who] were not eligible to claim because of the employment eligibility criterion was also a problem for the LPP insurance product?” council assisting the commission Rowena Orr QC asked.


In response, Mr van Horen said: “We knew that there was — that similar problems could occur.”

The CBA executive conceded that the bank was “moving too slowly”, but he claimed that it intended to resolve the problem once it had concluded its investigation of CCP issues and identified the number of customers affected.

“[Our] attention was all on CCP and we were moving too slowly, but we were absolutely moving to close that issue down,” the executive said.

ASIC was formally notified of the issue on 4 October 2017.

Commissioner Kenneth Hayne put it to Mr van Horen that “CBA swept the problem aside in the hope it would go away”.


Mr van Horen denied the claim and argued that while there had been “a number of errors of judgment”, CBA had always intended to “put customers right”.

He said: “Was there poor judgment? Was there poor execution on our part? Yes. Did we make a number of errors of judgment along the way? Absolutely. Should we have reported it to ASIC earlier? Yes.

“Part of our assumption always was, you know, rightly or wrongly, that we would put customers right in financial terms, that they would be no worse off, and that included compensating for interest or time value of money, where appropriate.”

Mr van Horen added: “I can say with conviction that CBA — certainly in all of my engagement on this matter and everything I’ve observed from investigating — had no intention to sweep the matter aside or pretend it didn’t exist.

“It’s always been our intention that if we know there’s a problem, we will fix it, and we will put customers right.”

Earlier this month, CBA announced that it will no longer sell its Credit Card Plus (CCP) and Personal Loan Protection (PLP) products, noting that it will set aside approximately $16 million, including interest, to roughly 140,000 Personal Loan Protection and Home Loan Protection (HLP) customers.

CEO-elect and current group executive of retail banking services Matt Comyn attributed concerns over mis-selling to the bank’s decision.

“Many customers have relied on these products during very stressful times in their lives. But we have found it hard to achieve the right balance between simplicity and accessibility on the one hand, and limiting the product to the right group of target customers on the other hand,” Mr Comyn said.

“We have concerns that some customers who have been sold these products may not have been eligible to receive all of the employment-related benefits. We have also sought consumer groups’ views on our concerns and they agree.”

What do you think about the major banks? The last 12 months have been challenging for the big banks. Rising funding costs have continued to pressure margins, leading to pricing changes towards the end of 2017. Meanwhile, regulatory measures and higher capital requirements are forcing the big four to tweak their policies. 

Which lenders have continued to deliver excellent product and service, and which lenders have communicated the myriad changes best?

This is your chance to let us know what you really think in the 
Third-Party Lending Report – Major Banks survey for 2018. 

[Related: CBA to refund customers after scrapping insurance products]

RC questions whether CBA ‘swept aside’ insurance problem

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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