Prime Minister Malcolm yesterday announced a Royal Commission into the banking, superannuation and financial services industries, including the life and non-life sectors.
According to draft terms of reference outlined by the government, the Commission must inquire into the nature, extent and effect of misconduct by a financial services entity (including by its directors, officers or employees, or by anyone acting on its behalf); any conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations; and the use by a financial services entity of superannuation members’ retirement savings for any purpose that does not meet community standards and expectations or is otherwise not in the best interest of members; and several other areas.
A statement issued by the Prime Minister said: “All Australians have the right to be treated honestly and fairly in their dealings with banking, superannuation and financial services providers. The highest standards of conduct are critical to the good governance and corporate culture of those providers.”
It added: “The Government has decided to establish this Royal Commission to further ensure our financial system is working efficiently and effectively.”
The statement said that the Commission will take a conventional, focussed approach. “It will not be a never-ending lawyers’ picnic.”
“We will ensure that the Inquiry will not defer, delay or limit, in any way, any proposed or announced policy, legislation or regulation that we are currently implementing.”
The inquiry will also consider how well equipped regulators are to identify and address misconduct.
In a response, the Insurance Council of Australia (ICA), which represents non-life insurers, said: “The general insurance industry is ready to contribute to the Turnbull Government’s Royal Commission into the financial services sector.
“Over the past six years the general insurance industry has contributed to numerous government-initiated inquiries and reports including the comprehensive Financial System Inquiry, the Senate inquiry into general insurance, the Northern Australia Insurance Premiums Taskforce, Henry Tax Review, Queensland Floods Inquiry, and three Australian Government Actuary reports.
“The inquiries have concluded that the general insurance industry, which pays more than 97% of claims, does not have systemic issues that need addressing.
“The general insurance industry is one of the most heavily regulated and scrutinised sectors of the Australian economy, with strong consumer protections. The ICA and its members are working closely with regulators and consumer representatives on issues that affect insurance customers, including product disclosure and mental health. An Interim Report of the review of the General Insurance Code of Practice is also now open to community feedback.”
Most Australians get their life insurance coverage via their superannuation funds. The Australian Institute of Superannuation Trustees (AIST) yesterday welcomed the announcement of the Royal Commission into the alleged misconduct of the banking sector, but warned that broadening the scope to include superannuation was an unnecessary measure and a waste of taxpayer money.
AIST CEO Eva Scheerlinck said: “This inquiry has been brought on by the banks themselves. They have abused their social licence and betrayed community trust which has resulting in a deluge of complaints from their own customers.”
She strongly rejected the government’s move to include superannuation in the inquiry. “Australia’s super system is world class, and there is no evidence of gouging, fraud or unethical behaviour to warrant a Royal Commission into the industry,” she said.
Ms Scheerlinck said the superannuation and life insurance sectors had been the subject of numerous government and independent inquiries in the past decade, resulting in a raft of reforms, many of which were still being implemented. Current ongoing inquiries include the Productivity Commission review, while a range of reviews are underway into insurance in superannuation. Past inquiries involving superannuation include the Financial System Inquiry, the Ripoll Inquiry, the Cooper Review, the Henry Tax review, the Hockey Tax Inquiry, the Retirement Incomes Review, the Ramsey Review as well as numerous parliamentary inquiries.