The Hayne royal commission has heard how the Commonwealth Bank continued to sell consumer credit insurance products for years after concerns over their value to customers was raised as a potential problem.
CEO Matt Comyn, who headed Retail Banking Services from 2012 to earlier this year, said the Australian Securities and Investments Commission (ASIC) had alerted him to concerns in late 2014 after a meeting on another project.
The following year an internal audit found about 64,000 customers had been sold CreditCard Plus insurance when they were not eligible to claim benefits because they were not employed.
Mr Comyn says he raised concerns about consumer credit insurance on three occasions with former CEO Ian Narev, starting in 2015, and had suggested suspending sales.
“We had, I think, quite a robust discussion during the course of that meeting, and my recommendation to suspend the sales was not agreed with,” Mr Comyn told the royal commission today.
Mr Narev’s view was that the product was still relevant for customers, improvements could be made and the wealth management division also was in favour of their continued sale, he said.
The CreditCard Plus products were profitable, Mr Comyn said, but the performance of the overall business would not have been harmed by discontinuing their sale.
Mr Comyn earlier become aware of problems in the UK financial sector due to the mis-sale of personal payment insurance products, which led to “billions and billions” in financial remediation for customers, but he said he was “over-relying” on differences between the UK and Australian contexts.
[UK banks are estimated to have paid out more than £40 billion ($70 billion) in compensation to customers for mis-selling personal payment insurance, with the cut-off date for consumer claims running until August next year.]
Prior to this year CBA sold three consumer credit insurance products, CreditCard Plus, home loan protection cover and personal loan protection cover, with CommInsure manufacturing the products.
Mr Comyn said his concerns included the value of the products, eligibility criteria, the claim payout ratio and whether they provided appropriate value and benefits for customers. He was also concerned that customers didn’t understand the products and about poor sales practices.
ASIC completed a report in 2011 that highlighted deficiencies in the sale of consumer credit insurance and which made 10 recommendations, including better sales scripts.
Mr Comyn said he first viewed the complete report in detail in about 2015, well after he had taken responsibility for retail banking.
The company this year stopped selling CreditCard Plus and personal loan protection insurance.