Australia’s corporate watchdog has filed a civil claim against wealth manager AMP Financial, accusing its financial planning arm of intentionally cutting clients’ life insurance cover for higher fees.
In the Federal Court claim, the Australian Securities and Investments Commission (ASIC) alleges some planners engaged in “rewriting conduct”, under which existing life and other insurance policies were cancelled and replaced with new ones, in order to generate higher commissions.
“The financial planners stood to receive higher commissions whilst at the same time exposing the clients unnecessarily to underwriting and associated risk,” ASIC said in a statement.
The regulator said six AMP employees advised about 40 life insurance customers to take out new policies which involved downgrading their level of cover in exchange for higher commissions from 2012 to 2013.
By selling weaker insurance policies for higher commissions, AMP’s financial planners “failed to act in the best interests of the clients”, ASIC said.
AMP faces a potential AUS$6 million fine since under Australian corporate law, each contravention attracts a maximum penalty of AUS$1m.
“AMP will carefully consider ASIC’s pleadings and file its defence in due course,” the australian wealth fund manager said in a statement. “AMP is apologising to the customers impacted and they are currently being compensated,” it added.