A class action has been filed over the cost of insurance selected for members of Colonial First State Investments Limited, the wealth management subsidiary of Commonwealth Bank of Australia (CBA).

An action lodged on behalf of hundreds of thousands of Australians in the Federal Court in Victoria in January by Shine Lawyers alleges Colonial “tipped its members into overpriced policies with the bank’s insurance arm”, even though substantially similar or better policies with cheaper premiums were available through other providers.

“This appears to have been a mutually beneficial arrangement that had the effect of putting profits ahead of people,” Shine lawyer Rebecca Jancauskas said.

The action alleges members were charged excessive insurance premiums between January 2014 and January 2020 after Colonial First State took out group insurance policies from The Colonial Mutual Life Assurance Society Limited, the key life insurance entity of CommInsureLife.

“These customers were forced to pay more for life insurance as well as total and permanent disability insurance, and this has eaten into their superannuation,” Ms Jancauskas said. “Many of these people are approaching retirement and now their nest egg has shrunk as a result of the conduct of Colonial.”

In November a class action against NAB saw the bank agree to pay $49.5 million to settle a group claim over “junk” credit card and personal loan insurance.