Federal Court orders Allianz, AWP to pay penalties

Federal Court orders Allianz, AWP to pay penalties | Insurance Business Australia

Federal Court orders Allianz, AWP to pay penalties

The Federal Court has found Allianz Australia Insurance Ltd and sister company AWP Australia Pty Ltd to have engaged in misleading and deceptive conduct when selling travel insurance through Expedia websites between February 2015 and September 2018.

During the period, Allianz issued and underwrote the travel insurance products which AWP marketed and sold through websites operated by Expedia, Inc. The civil action against the Allianz SE subsidiaries was commenced by the Australian Securities & Investments Commission (ASIC) in September 2020.

“The Court orders that… pursuant to s 12GBA of the ASIC Act, Allianz Australia pay to the Commonwealth a pecuniary penalty in the amount of $360,000 in respect of the contraventions the subject of declarations 1 and 2; pursuant to s 12GBA of the ASIC Act, AWP pay to the Commonwealth a pecuniary penalty in the amount of $1,140,000 in respect of the contraventions the subject of declarations 6 and 8,” reads the 30-page decision seen by Insurance Business.

The defendants were also ordered to pay ASIC’s costs of the proceeding in equal portions.

It was noted in the ruling that Allianz and AWP admitted that they engaged in conduct in relation to financial services that was likely to mislead or deceive, and that they failed to ensure that financial services were provided efficiently, honestly, and fairly. The two also made admissions that they otherwise failed to comply with financial services laws.

Financial services licence obligations were breached when the insurer failed to correctly disclose how premiums were calculated in product disclosure statements, as well as when Allianz and AWP failed to prevent the sale of insurance to consumers who were ineligible to make claims under the policies. Additionally, Allianz and AWP failed to prevent Expedia websites from misusing an insurance-related quote from the Department of Foreign Affairs and Trade.

“Of relevance to the determination of penalty are the steps taken by Allianz and AWP to remediate customers, to redress systems, policies, or practices which facilitated the contraventions in question, and to cooperate with ASIC throughout the course of its investigation and these proceedings,” noted Chief Justice Allsop in his judgement.

“Allianz and ASIC voluntarily undertook a remediation program for premium remediation in relation to the premium calculation methodology breach, and developed, executed, and finalised a compensation process to address the impact of reported issues on customers, including voluntarily undertaking a claims remediation program to ensure that customers who made a claim were not disadvantaged by the operation of the journey or age criteria.”

With respect to the misused quote, however, remediation did not take place – it was submitted that the potential impact on those buying insurance was indeterminable and unquantifiable.

The Chief Justice stated: “In circumstances where the contraventions arose from careless omissions and failure to closely monitor the sale of insurance products on partner websites, where the loss or damage caused to customers was largely unquantifiable, but where the contravening companies are large, powerful companies that have demonstrated a corporate culture failing to give primacy to compliance with financial services laws, the proposed penalties fall within the appropriate range to deter Allianz and AWP from engaging in similar conduct in the future, and to deter the sector more generally from adopting a lax attitude towards compliance.”

ASIC deputy chair Sarah Court, meanwhile, reiterated the watchdog’s commitment to improving the outcomes for Australian consumers who purchase insurance.

“The value of an insurance policy is in the promise – that a consumer can feel confident and secure that they will be looked after if something goes wrong,” she commented. “ASIC remains committed to ensuring that consumers’ experience matches that expectation.”