Ace will pay $1 million to financial counselling and literacy initiatives and a “significant sum” to compensate customers following mis-selling at its subsidiary Combined Insurance.

The Australian Securities and Investments Commission (ASIC) started an investigation into selling practices at Combined following allegations from whistleblowers.

As insuranceNEWS.com.au reported in a Breaking News bulletin on Thursday, ASIC has now accepted an enforceable undertaking from the insurer, which requires the appointment of an independent expert to review Combined’s compliance systems.

Ace admitted a “limited number” of authorised representatives (ARs) engaged in overselling policies, twisting or churning policies, and selling unsuitable policies.

It also accepted it failed to foster and maintain a culture of compliance within Combined.

Those targeted included a NSW man who was sold a Combined policy by an AR at a dirt-bike event, on the basis it would cover medical costs should his children be injured riding. Combined does not offer cover to people injured in dirt-bike accidents.

The man’s child was subsequently injured in a crash and incurred significant medical costs.

A couple in Queensland were sold Combined policies even though they were ineligible to hold them. The couple declared they were receiving pensions, but the AR did not record that on the application. Combined does not cover individuals receiving government pensions.

The couple was not asked about their medical histories, which would also have excluded them from cover.

An ASIC spokesman told insuranceNEWS.com.au it is impossible to put a figure on the remediation at this stage, but it will be a significant sum involving hundreds of people.

“For some it will just mean being put on a proper plan, but others will have their premiums paid back,” he said. “All those affected will be remediated.”

More than 15 years ago Combined faced similar action over the sale of inappropriate policies to Aboriginal communities. But the ASIC spokesman says while some vulnerable people were affected, indigenous communities do not appear to have been targeted this time.

ASIC Deputy Chairman Peter Kell says it is “a clear case of how poor culture and conflicts of interest in remuneration have led to poor conduct, resulting in a financial cost to both consumers and the organisation alike”.

“ASIC’s priority in this significant investigation was the affected consumers, and we have pursued the best result possible for those consumers.”

Ace, which is merging with Chubb under the Chubb brand, announced earlier this month that Combined will cease to write new business in Australia and New Zealand.

An Ace spokesman told insuranceNEWS.com.au the insurer has “a commitment and responsibility” to ensure its agents comply with legal requirements.

“Ace regrets any instance where that responsibility was not fully met.”