Why has ASIC launched legal action against AMP?

Ross Greenwood speaks to a former AMP (ASX:AMP) manager who says misconduct at the financial planning firm “was almost condoned” as the corporate regulator takes legal action against the wealth manager. Ross also speaks to Alison Moore, a whistleblower who worked at Combined Insurance, about the which faced similar fraud investigations.

Introduction: Why has ASIC launched legal action against AMP?

Ross Greenwood: Today, AMP, which is under significant pressure from the Royal Commission already is now facing claims from ASIC, the corporate regulator, which has taken civil penalty action against AMP Financial Planning for alleged failures relating to insurance advice. Just to explain what this is about is that, there were certain AMP financial planners alleged to have engaged in rewriting conduct, which is providing advice that results in the cancellation of the client’s existing life insurance, total impairment disability, trauma and or income protection insurance policies, but they might ultimately taking out similar replacement policies by a way of a new application rather than by a way of transfer.

Can you imagine why they’d do that? The reason is because they were front loaded with commissions. That’s the reason why.

In the industry it’s what they called twisting or churning. It’s highly illegal. It’s not the first time it’s taken place because if you only go back a few years to April 2015, there was a series of investigations that came with another big insurer called Combined Insurance. It was a fraud that affected thousands of people. The reason why it became a case here in Australia was mainly because of one person, somebody who had worked inside Combined Insurance between 2003 and 2014.

Now, Alison Moore was a whistleblower. She went out and told publicly what had taken place. Though she can’t talk about the AMP situation directly, what she can talk about is the sales practices that can take place inside the insurance industry, the due policy holders, and even say fake people signed up for life insurance. She’s online. Many thanks for your time Alison.

Interview: Alison Moore, Whistleblower

Alison Moore: Hi, Ross. Thanks.

Ross Greenwood: In your situation, and I know it’s a little bit in time ago, but you saw all of these happen firsthand, didn’t you?

Alison Moore: Absolutely. I saw it for a long time. I would bring it to the attention of my direct manager above and assured that no it’s not going on. People knew about it and they basically blatantly covered it up.

Ross Greenwood: It’s been described as being endemic and incringed in the insurance industry. Just explain exactly what happens and why it happens.

Alison Moore: To be clear, the prime motivator in all of this is money and greed. My job was a sales position. We’re talking about sales position. It’s reliant on figures, and figures mean money. This would constantly run down your to sales meeting. The way to achieve these figures was to go into competition with your other cohorts in the business. It was a sales culture based on competition. In theory, is fantastic prizes, bonuses, but people became greedy. It was difficult in a competitive environment to make those sales. Clearly, the way around it was to find a loophole and to cheat. What was happening was people were–

In my company, I had all products. Sometimes I had products– I think Combined had been in operation for over 50 years when I joined the company. A lot of people had products that went way, way back. The company policy was that you weren’t supposed to replace policy. In theory, that just went by the buyer. People were placing those policies with new policies that came on because it reflected in those agents figures.

Ross Greenwood: In other words, if I were a customer, I would be encouraged by the agent to change my life insurance policy, my total and permanent disability policy by income replacement policy to a new policy because that policy came attached with big upfront commissions that the agent would get paid and as a result they would be able to make their targets and get all the bonuses.

Alison Moore: That’s right. It came from the top down. Executives would all be on their sales incentives as well. It was a trickledown effect and then luckiest on the bottom we’re doing the dirty work.

Ross Greenwood: I got to say you did a great job in the whistle blowing that you did that time. I know there was personal cost involved for anybody who takes that type of a stand, but it’s actually such an important thing. As I said Combined Insurance, Alison Moore was there between 2003 and 2014. If you go to the Combined Insurance website today, you will find that they are not writing any new policies or business in Australia for any longer. I’ll tell you what? Alison, I appreciate your time here on the program this evening.

Alison Moore: Thank you Ross.

Ross Greenwood: Alison Moore there. As I say, really important. Just to explain in the AMP case that’s come up today, there was a similar allegation. AMP today has said it’s cooperating with an ASIC investigation into the matter that started in 2014. It will carefully consider as Asic’s pleadings and follow in due course. It does say however, it’s in regards to the conduct of a former AMP financial planning adviser, somebody called Rommel Panganiban who engaged in insurance rewriting.

The AMP says it removed Mr. Panganiban’s authorization in 2014 and reported his conduct to ASIC. He was subsequently banned by ASIC in 2016. It is apologizing to the customers and currently, they are being compensated. As I say, we’ll see exactly where all of that goes to. We might just have a quick look at– One call has just jumped on. Michael is in Sydney. Hello Michael, how are you?

Michael: Good, thanks. Ross, how are you?

Ross Greenwood: Good, thank you.

Michael: I worked for AMP exactly 2010 in direct outbound sales manager role 15 to 20 direct health under me and I ended up losing my job because I wasn’t hitting my figures compared to another team that was and then it later came to light that that team was churning the customers from one policy to another inclining all the commission on the very of the new policy.

Ross Greenwood: What you are Michael is that the behaviour that you saw firsthand inside AMP that this example is not an isolated case that it had taken place that was even beforehand?

Michael: I don’t believe it was isolated, but I actually almost believe that it was almost dying because and performance pain because some of my guys weren’t hitting their numbers and I wouldn’t allow them to churn, and what they were doing is they were using AMP client base as the target. They were doing marketing materials up to these clients who were existing customers on the employer super plan and then going on the back setting up insurance products but then those who had existing would then churn from one policy to the next where it was required.

There was no difference in the benefit or the carriage for the client is only that the agent is actually inclined to commission the targets that were necessary to be achieved for these guys to hit their numbers.

Ross Greenwood: Michael, when you’ve seen the statement coming out today, these allegations against some in the AMP financial planning division today, has this surprised you at all?

Michael: No, not at all. I believe I took an ethical stand against that top behaviour and it ended up costing me my job. I thought it always, but then it would just be a matter of time because that behaviour couldn’t go on for long period when they are coming to life not being in the best interest of the client.

Ross Greenwood: 2010 you lost your job. It’s an awful long time for it to come to light. Michael, who was a manager at the AMP. As he says, he lost his job because he would not do this. In other words, twist or churn policies to earn more commissions for that particular time. It’s an ethical stance he’s taken, but also one that ultimately has cost him his job.

 

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