West­pac ‘rips off clients’ with life in­sur­ance

The Australian - - FRONT PAGE - AN­THONY KLAN

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?”

LYN­DON MECHIELSEN

Gre­gory and Sharmila Len­thall are lead­ing a class ac­tion against West­pac that could in­volve thou­sands of cus­tomers

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