AMP had knowledge it was charging dead customers

On Monday, the Hayne royal commission learned of a number of emails between AMP staff members dating back to 2016 raising the issue of insurance premiums being charged to dead people.

A 2016 email from an AMP staff member, Luke Wilson, regarding a claim being paid to a dead person observed that “this has been going on well before I started in the team”.

Counsel assisting Mark Costello questioned witness and AMP chief customer officer Paul Sainsbury about what Mr Wilson meant by this.

That problem, the commission learned, was AMP’s practice of charging dead people insurance premiums.

In another email, AMP staffer Luke Wilson wrote:

"The issue is that [corporate superannuation] continued to charge premiums for the insurance even after AMP has been notified of the member’s passing. We have raised this with [sic] corp in the past and asked them why they continue to charge the insurance premiums once they are notified of a customer’s death. Back in 2016 I believe that they were of the understanding that premiums are refunded when the policy is paid, which is incorrect."

However, AMP only opened an investigation into the matter in April 2018, which was prompted by similar events at CBA, Mr Sainsbury told the commission.

“It was as a result of the CBA’s circumstances around premiums on deceased members. A question was asked in AMP ‘could this happen to us?’” Mr Sainsbury told the commission.

Counsel assisting Mark Costello asked: “Stopping the premiums being charged when you’ve been notified that the person is dead seems like a rather obvious step, doesn’t it?”

“Yes, it does,” Mr Sainsbury said.

Costello: “But it wasn’t taken in 2016?”

Sainsbury: “No. The system was coded to refund it when the claim was admitted.”

Costello: “Why was that?”

Sainsbury: “I couldn’t tell you.”

The royal commission then heard about a case in which a customer had died on 24 February 2015 but premiums were still being deducted at June 2016. There was a request for the charged premiums to be reversed. The issue was not reported to ASIC.

“I can only assume the claim wasn’t admitted at that time. It’s a process as I’ve described. A refund occurs automatically by the system when a claim is actually finalised,” Mr Sainsbury explained.

Commissioner Hayne then sought further clarification of what Mr Sainsbury meant by a “refund”: “A refund of what is deducted? A refund plus the earnings it would have earned? A refund of what?”

“Commissioner, I believe it is a refund of the premiums,” Mr Sainsbury said.

“So the time value of money goes to AMP’s benefit?” the commissioner asked.

Mr Sainsbury replied: “Potentially.”

“Charging premiums for life insurance to someone who’s dead. That’s the position isn’t it?” Mr Hayne said.

“Yes,” said the AMP executive. “That’s the way the system is treating it today for a portion of our business.”

The royal commission heard that neither APRA nor ASIC were told that AMP was aware that it was charging life insurance premiums to dead people in 2016.

AMP charged 4,645 deceased persons life insurance premiums totalling approximately $1.3 million, the commission heard.