Only two of the big four banks’ life insurance operations will be forced to pay compensation to clients by the Australian Securities and Investments Commission (ASIC).

The regulator’s report on banks’ advice fees says AMP, ANZ’s OnePath and NAB-linked MLC must pay $188,350 to 134 clients.

OnePath will pay $187,463 to 127 customers. MLC must pay only $887 to seven customers.

However, repayments relating to life insurance advice for which no service was delivered may be higher, because on this matter ASIC has combined all advice types for some companies.

AMP has offered $2.1 million compensation to 8178 customers for non-service from its many dealer groups.

Commonwealth Bank has reportedly offered $253,652 compensation to 17 clients.

NAB will pay 2659 clients $1.1 million, and Westpac will pay $1.2 million to 177 clients.

ASIC’s report notes some advice fees were included in life insurance premiums, to cover the cost of delivering advice that was, in fact, not delivered.

It says this pushes up the cost of life insurance.

ASIC says there were few reports of non-service among fee-for-service practices outside the big banks and AMP.

Its review of bank and AMP advisers says licensees lacked systems to ensure advice was being given in return for fees charged. ASIC is also critical of the number of clients advisers had on their books and their ability to monitor or advise them effectively.

Fees charged for client file retention are singled out for criticism. ASIC notes advisers are required by law to keep records for seven years.

The regulator says it does not regard attempting to phone a client as adequate “service”.

And it is concerned about licensees failing to develop and enforce procedures for the delivery of advice.

ASIC requires the banks and AMP to complete their customer remediation reviews by next June 30, and it expects higher compensation figures to emerge.

The regulator is now conducting enforcement investigations into the major institutions’ advice operations.

Deputy Chairman Peter Kell says most of the failures flagged in the report precede the Future of Financial Advice (FOFA) legislation.

“Changes introduced through the FOFA reforms have shone a light on the advice fees customers are paying and the services they should be receiving in return. Our report identifies the institutions’ systemic failures in this area, which we are putting right by ensuring customers are fairly compensated.”

ASIC’s MoneySmart website has been updated to show how much financial advice costs and what to expect from an adviser.

“Customers should check they are receiving the services they are paying for,” Mr Kell said.

“Customers who are paying ongoing advice fees for services they do not need can ask for those fees to be switched off.”