Australia's biggest bank, the Commonwealth Bank of Australia (CBA), has admitted it sold insurance products to over 100,000 customers who were ineligible to claim on the policies.
CBA sold credit card insurance to about 64,000 customers who were not eligible to claim against it, including students, pensioners and the jobless. The bank also admitted mis-selling of loan protection products for personal and home loans.
In addition, CBA was aware from about 2015 that it was going to start having problems with these insurance products, but it was only last year that it actually decided to do something about it.
“There were many customers who did not meet the criteria to whom we sold it,” CBA Executive General Manager of Retail Products Clive van Horen yesterday told the Royal Commission which is probing the issue.
CBA failed to take “reasonable steps” to ensure customers were aware of the product limitations when it was sold with CBA-branded credit cards between 2011 and 2015, he said.
The Royal Commission can recommend criminal or civil prosecutions and legislative changes, potentially forcing changes to bank practices.
Mr Van Horen also said that the bank has now started its remediation process, that is, pay customers the compensation they’re owed for taking out these policies.
CBA has issued a “call to action” letter asking policyholders to make a claim on problematic insurance products. The response rate for such letters was around 30%, prompting the inquiry to question how hard the bank was trying.
“I can say with conviction ... we had no intention to sweep the matter aside or pretend it didn’t exist,” Mr Van Horen said.
CBA this month announced it will refund A$16 million (US$12.3 million) to 140,000 customers who took out personal loan protection and home loan protection.