Following an investigation into Combined Insurance, a division of Ace Insurance Limited (Ace Insurance), ASIC has accepted an enforceable undertaking (EU) from ACE Insurance. Combined Insurance operates a business which includes the sale of sickness and accident insurance policies to individual consumers. Combined’s independent contractors, who were appointed as authorised representatives or sub-authorised representatives under ACE Insurance’s AFS licence, were largely remunerated on a commission only basis. The contractors travelled door-to-door selling and renewing Combined Insurance products. ASIC’s investigation focussed on the making of misleading statements to consumers and the sale of unsuitable Combined insurance policies, as well as allegations of systemic failures within the Combined Insurance division including poor culture and failure to ensure consumers were given appropriate advice.

ACE Insurance admitted that there has been contraventions of the Corporations Act and the ASIC Act, including ACE Insurance’s requirement to take reasonable steps to ensure its representatives complied with the best interests laws which came into effect under the Future of Financial Advice (FOFA) reforms. Under the EU, ACE Insurance is required to:

  • appoint an independent expert to review Combined’s compliance systems;
  • implement a remediation plan to compensate affected consumers; and
  • make a donation of $1 million to financial counselling and financial literacy initiatives.

ACE Insurance admitted that a limited number of Authorised Representatives in the Combined Insurance division engaged in some of the following conduct during the period from 1 January 2012 to 30 June 2014:

  • Selling policies to consumers which duplicated coverage already held by the Consumer and exceeded the underwriting limited imposed by Combined (overselling);
  • Encouraging consumers to cancel their existing policies and take up new policies which resulted in a change of coverage for no benefit, and on some occasions a detriment (churning);
  • Advising consumers to take up policies under which they would not be eligible for coverage as they were either ineligible or seeking coverage for a potential injury that was specifically excluded under the Policy (unsuitability).

ACE Insurance further admitted that during this period, it failed to maintain a culture of compliance within Combined Insurance, demonstrated by:

  • Failure to prepare adequate compliance policies and procedures;
  • Failure to take action to address identified compliance risks;
  • Failure to have adequate systems in place to be able to investigate and supervise compliance by authorised representatives with financial services laws; and
  • Failure to have adequate procedures in place to ensure that Combined’s consumers were given appropriate financial advice.

ASIC has acknowledged the cooperation of ACE Insurance. Combined Insurance will cease writing new business in Australia on 22 April 2016 and that the change will not impact existing policyholders. Further details can be found here.