Westpac ‘rips off clients’ with life insurance
Westpac has ripped off its own banking customers by selling them overpriced life insurance products identical to cheaper policies it sells to the public through independent financial advisers, a class action legal case alleges.
Shine Lawyers has lodged the action against the nation’s second-biggest bank, alleging it abused its position of power and breached its fiduciary duties by using its in-house financial planners to sell its customers policies it had loaded with “excess premiums”.
The case has the potential to embroil Westpac in a financial services controversy after ANZ and National Australia Bank in 2015 said they had compensated clients after wrongdoing relating to financial advice.
The Commonwealth Bank has announced the sale of its insurance business after the bank was rocked by scandals at its financial services arm. Chief executive Ian Narev announced plans to retire next year after Austrac launched anti-money laundering action against the bank.
The class action claims Westpac and its subsidiaries Bank of Melbourne, Bank of SA and St George charge their own banking customers 4.5 per cent more when the policies are taken out, and again each time they are renewed compared with policies available through independent advisers.
The Australian has obtained many life insurance policies that appear to support the claims.
Life insurance policy quotes were obtained for a Westpac “BT Protection Plan” both from a Westpac financial planner and then from a financial planning company not owned by the bank.
The quotes are for a 51-yearold male employed as an accountant, who earns $75,000 a year and doesn’t smoke.
The non-Westpac planner policy costs $91.61 a month. The Westpac planner policy costs $100.77 a month — exactly 10 per cent more.
After Westpac’s 5 per cent “discount” was applied, the Westpac customer’s policy cost $95.73 a month — 4.5 per cent more than the same policy provided by the non-Westpac planner.
Distributed by Westpac Financial Planning, the policies are sold as Westpac Protection Plans, BT Protection Plans and St George Protection Plans and include life and income protection insurance as well as coverage for total and permanent disablement and trauma.
A Westpac spokesman said the bank had “only recently received the claim” and it was looking into the matter.
“We are investigating the allegations but don’t believe we have breached any obligations to customers,” the spokesman said.
The individual policies — several of which have been seen by The Australian — carry the words “office use” along with the code CF 1.045, which Shine says represents the 4.5 per cent extra it has established is being charged to Westpac customers.
“The premiums payable on the
insurance policies were about 4.5 per cent higher than the premiums payable on identical policies of insurance obtained from Westpac Life through independent financial advisers,” the filing alleges.
Westpac Life is the arm of the bank that handles life insurance.
The action is being run by a group of seven Westpac customers, led by Gregory and Sharmila Lenthall of Ipswich in southeast Queensland, but has the potential to extend to cover thousands of other Westpac, Bank of Melbourne, Bank of SA and St George customers who have bought life insurance from their bank through its financial planners.
“We were very disappointed to find out such a large bank affiliated with such big-name insurance products had put profits first instead of looking after its customers,” Mr Lenthall told The Australian yesterday.
“I just think the whole thing stinks.”
Speaking at a Trans-Tasman Business Lunch in Sydney on Tuesday, Westpac’s head of consumer banking, George Frazis, said banks were not “beyond reproach” but that “customers have become all powerful”.
“The banks have become an easy target, not fully respected for the important role they play in our economic prosperity,” he said.
While Westpac, via its own financial advisers, has been issuing insurance policies with the identifier “CF 1.045”, the bank has been selling identical insurance policies, via financial planners it does not own, carrying the code “CF 0.95”.
The class action alleges this code means those policies are sold at 95 per cent of face value — or at a 5 per cent discount.
“Premiums calculated by Westpac Life by reference to the premium tables identified using the code ‘CF 1.045’, were 10% higher than premiums calculated by reference to the premium tables identified by the code ‘CF 0.95’,” the class action says.
However, the extra charged to Westpac customers was 4.5 per cent — not the full 10 per cent — because Westpac offered its customers a 5 per cent discount it called “premier advantage” or “wrap discount”.
The class action states Westpac “unfairly took advantage” of its customers who were at a “special disadvantage” and that it had advised those customers to obtain Westpac insurance policies “with the highest premiums that could be charged”.
Shine is seeking from Westpac the excess premiums charged, along with “all benefits, profits and gains made or derived” by the bank from its use of that money.
“It’s disappointing for those Westpac customers who have placed their trust and confidence in Westpac financial advisers. They feel incredibly let down,” Shine’s Janice Saddler said.
“When is this going to end for everyday Australians who rely upon those financial institutions to do the right thing by them?”
Gregory and Sharmila Lenthall are leading a class action against Westpac that could involve thousands of customers