Banking review lacks power and transparency
4th Oct 2016
Identified failings in the sale life insurance products by Australian banks, will not be properly addressed unless the Australian Banking Association expands its review of product sales commissions and product based payments, the Australian Lawyers Alliance (ALA) said today.
ALA spokesperson Josh Mennen said that while the banking industry said it was committed to reforming the life insurance industry, the troubled sector specifically excluded life ‘remuneration structures, product design issues and quality of advice regarding life insurance products from its review, thereby ignoring the elephant in the room.
“The conflicts of interest, the issues with banking culture, and the outdated insurance definitions which are apparent in the life insurance industry will not be fixed unless the ABA opens up its review of the sector and gives it teeth” Mr Mennen said.
“Reviewing industry culture and practices around banks’ cross selling of their own life insurance products ahead of other products, often to the customers detriment, should be a key priority of the review.
“As it stands, none of the issues that led to the terrible case studies of failed life insurance outcomes featured from recent media reports will be considered,” Mr Mennen said.
“The review also lacks the powers needed to thoroughly investigate systemic problems in the sector. For example, review’s terms of reference do not cover the Stakeholder Advisory Panel’s powers to compel oral evidence or the production of documents, raising questions as to its authority and capacity to sufficiently scrutinise the individuals involved, including bank staff/management,” Mr Mennen said.
“As it stands, the ABA’s review currently fails to examine the openness and diversity within banks’ Approved Product Lists (APLs). This is an important area of potential conflict of interest and must be examined.
“The review also appears to be unable to make binding recommendations on the ABA and its members. What is the point of a review if its recommendations cannot be enforced?” Mr Mennen said.
Mr Mennen said it was essential that the review be conducted in public, and that it hear from victims. Neither of these aspects are in the scope of the current review.
“This review as it stands will not be conducted in a public forum with openness and transparency. This denies the review legitimacy that is offered by a public inquiry and opens it up to criticisms of ignoring issues of concern,” Mr Mennen said.
“It also will not hear from victims, who deserve to have their stories told to inform and give context to any findings and recommendations.
Mr Mennen said the terms of reference for the review should immediately be amended to address these concerns and ensure public confidence in the findings of the review.
“The review should clarify that the Stakeholder Advisory Panel has power to compel oral evidence and the production of documents, issue binding recommendations on the ABA and its members, and be conducted in public,” Mr Mennen said.
“It should also hear from victims and use their testimony when forming its recommendations. It must also clarify exactly which financial institutions are being reviewed.”