CBA rushed to shut down junk insurance

The Australian 12:00am April 4, 2018

Michael Roddan

The banking royal commission’s focus on junk insurance sold by Commonwealth Bank sparked sudden deliberations between new chief executive Matt Comyn and the bank’s retail product manager about how to stop selling the product.

Documents tendered to the royal commission reveal the internal discussions between the fledgling chief executive and Clive van Horen, executive general manager of retail products, who were forced to quickly announce the closure of its troublesome consumer credit insurance business ahead of hearings for Kenneth Hayne’s royal commission.

An email from Mr van Horen to Mr Comyn, then in his last weeks as head of the retail division at the nation’s largest bank, reveals the bank quickly reacted to a witness statement submitted to the royal commission by an aggrieved customer who was sold useless credit card insurance by a branch member.

“Given this is relevant to the CCI witness statement that went in Sunday night, we will call the RC and explain to them what we are announcing, so there are no surprises in the witness dock,” Mr van Horen told Mr Comyn in late February. “It’s one to manage carefully because there is risk we get them off-side.”

Mr van Horen said he was giving Mr Comyn the “heads up” on the bank’s plan because “things are moving fairly quickly on this front, and I want to make sure you’re aware and comfortable because these are quite material”.

Mr Comyn believed it was a good idea to inform the regulators of the decision to scrap the sale of the insurance, but said it was worth debating whether to actually make a public statement on the decision or to keep the decision quiet.

“We should also debate whether no announcement is better but it just comes out,” Mr Comyn said in his reply to Mr van Horen.

“I think we should also brief some of the consumer groups — eg (Financial Counselling Australia chief) Fiona Guthrie and (Consumer Action Law Centre chief) Gerard Brody,” Mr Comyn said.

A separate email shows Helen Troup, managing director of the bank’s insurance division CommInsure, was given less than 24 hours to formally approve ceasing the sale of the Personal Loan Protection and Credit Card Plus products. The decision also appears to have been made before the bank conducted a review of the likely financial impact of the move. “A working group will be established to commence a more detailed financial review and an update provided in the coming weeks,” Adrian Kerins, head of direct insurance, told Ms Troup.

Despite knowing of regulatory issues and mis-selling for years, in some cases, banks are scrambling to close dodgy lending units as the royal commission heats up.

Along with CBA’s decision to close its consumer credit insurance business, ANZ made a snap decision to freeze its asset finance division, which takes in the bank’s car loan business. The division was unexpectedly suspended on the afternoon of March 16 — the Friday before the royal commission began its first round of public hearings.

A note from Ms Troup and Mr van Horen to the board, executive committee and the chief executive said the bank’s submission to the royal commission in late January noted there was a current regulatory investigation into the issues with the loan protection products. The note went on to say the royal commission had requested further information about the bank’s dialogue with regulators and that two witness statements had been prepared, which related to the products.

Ms Troup and Mr van Horen said these factors contributed to the need to close the businesses.

At a hearing for the royal commission in mid-March, CBA admitted it took two years to tell the Australian Securities & Investments Commission it had sold 140,000 income-protection policies to customers who were unemployed or not employed enough to claim on the policies.

According to another email, ASIC told CommInsure it was “extremely disappointed” to discover issues with the home loan and personal loan insurance products “via a complaint” rather than by a breach report. “ASIC’s view is that this is a systemic issue and is reportable to ASIC,” retail banking head of risk and compliance Larissa Shafir told Mr Comyn in September 2017.