MONDAY'S SUMMARY: Bruising encounter for Allianz

Allianz was the first general insurance company to face the Hayne royal commission today, and it was tough going.

Counsel Assisting, Rowena Orr, targeted a series of misleading statements that had been identified on the insurer’s website, and had in some cases remained in place for almost six years.

Ms Orr was returning to action following a short break after the group life session – most likely to the consternation of the general insurance executives scheduled to take the stand.

Following revelations of life insurance companies charging the dead premiums, spying on the mentally ill and giving the hard-sell to a young man with Down Syndrome, general insurance conduct as personified by Allianz could rightfully be considered less serious.

But Ms Orr dissected the issue with scalpel-like precision, with Chief GM Retail and Distribution Michael Winter not given a moment’s respite.

Less serious it may be, but serious nonetheless. The errors were strewn across travel, home, car and life insurance, but it was the travel section where the misleading statements were most serious and left to fester the longest.

They included incorrect assertions that the basic travel policy had unlimited overseas medical expenses cover, and that travel policies gave coverage in all countries. There were sub-limits in place and coverage was not available in countries where the Federal Government considered travel dangerous.

Ms Orr pointed out the insurer’s lack of urgency in addressing the issue, and a flawed decision not to report it to the Australian Securities and Investments Commission (ASIC).

“Allianz did not care enough to fix it,” she said, because taking down the website would “cost the company money”.

“At Allianz it is more important to protect the bottom line than to stop misleading customers,” she said.

Mr Winter said Allianz had a strong compliance culture, but accepted this was not evident on this occasion. The company had decided against spending $25,000 to $30,000 to get external lawyers to review the errors.

Ms Orr suggested that by using an in-house lawyer to carry out the review it took much longer than necessary.

There were 120 unique errors on the website, but Allianz’s presentations to the commission did not make this clear, Ms Orr said.

Mr Winter says the issue has now been reported to ASIC, and he expects to meet with the regulator soon to propose a remediation program.

Disciplinary proceedings against Allianz employees had not yet been considered, he said.

Earlier in the day Ms Orr gave a summary of the general insurance hearings.

After the section on Allianz’s website, the commission will turn to add-on insurance sold through car dealerships, when IAG’s EGM Business Distribution and Group Executive Ben Bessell will take the stand.

The remainder of the case studies relate to natural disasters with Suncorp CEO Insurance Gary Dransfield giving evidence about AAMI’s handing of claims from the Wye River bushfires of Christmas 2015.

Youi will face questions about claims handling following Cyclone Debbie last year and the Broken Hill hailstorm of 2016, before Mr Dransfield returns for Suncorp to discuss flooding in the Hunter Valley in 2015.

The royal commission will also examine the regulation of insurance, with Insurance Council of Australia CEO Rob Whelan set to take the stand, along with Financial Services Council CEO Sally Loane.

Ms Orr says that of 8977 public submissions to the commission, 620 were related to general insurance. The three most common areas were home and contents, car and travel.