Australia’s corporate watchdog has launched legal action against wealth manager AMP, accusing its financial planning arm of intentionally cutting clients’ life insurance cover for higher fees.
The Australian Securities and Investments Commission has alleged that some AMP financial planners engaged in “rewriting conduct”, under which existing life and other insurance policies were cancelled and replaced with new ones, in order to generate higher commissions.
“The financial planners stood to receive higher commissions … whilst at the same time exposing the clients unnecessarily to underwriting and associated risk,” ASIC said in a statement.
In a federal court filing made public by ASIC, the regulator said six AMP employees advised about 40 life insurance customers to take out new policies which involved downgrading their level of cover in exchange for higher commissions from 2012 to 2013.
By selling weaker insurance policies for higher commissions, AMP’s financial planners had “failed to act in the best interests of the clients and to prioritise the interests of the clients”, ASIC said.
The regulator said it was seeking fines and court declarations that AMP failed to take all necessary steps to ensure its planners acted “efficiently, honestly and fairly” and within the law.
AMP said it had been co-operating with an ASIC investigation into the practice of insurance “rewriting” since 2014 and that it would “file its defence in due course”.
The wealth manager had removed authorisation in 2014 from the only financial planner named in ASIC’s filing, and reported the individual’s conduct to ASIC in the same year, AMP added.
It said it was “apologising to the customers impacted” and that “they are currently being compensated”.