‘We have done wrong’, bank boss concedes, but nobody has been sacked

COMMONWEALTH Bank chief Ian Narev admits his company’s insurance arm did wrong by some, but they haven't sacked anyone.

Ian Narev, Chief Executive Officer of the Commonwealth Bank of Australia, appearing at a House of Representatives Standing Committee on Economics today. Picture: Kym Smith

COMMONWEALTH Bank chief Ian Narev admits his company’s insurance arm wronged some of its customers, but it hasn’t sacked anyone, despite patients -— some of them terminally ill — being refused legitimate claims when CommInsure used outdated medical definitions to reject them.

The revelations came on the opening day of bank chief executives fronting the House of Representatives economics committee’s banking review.

The banking industry has been hit with a string of financial scandals in the past decade or so, allegedly fleecing mum and dad investors of millions of dollars.

Mr Narev is the first of the big four bank chiefs to address the committee hearings which were called by Prime Minister Malcolm Turnbull in August after the major banks failed to fully pass on a Reserve Bank rate cut.

COMMINSURE SCANDAL

Mr Narev told the committee the bank had put in place a “very significant program” to investigate allegations against CommInsure, including that doctors were pressured to change medical opinions in order to deny claims.

“We have done wrong by some customers in that business and other businesses,” he said.

He said 17 customers who had been denied insurance payouts for heart attacks had now been paid, after CommInsure’s medical criteria were updated and brought in line with current scientific standards.

“I do want to emphasise, though, that we pay 22,000 claims a year in that business and, while I will never quote that statistic to undermine claims of the effect on the individual customer, it’s important to look at the overall business in the context of those numbers,” he said.

But CBA confirmed no staff member had been sacked over the scandal, with chief risk officer, David Cohen, saying the bank instead chose “to help customers”.

“No one has been terminated on the cases of rejecting terminally ill claims,” he said.

Mr Narev said the bank had already reviewed five million documents but that there was still work to do.

While investigations has led to some employees suffering pay-related “consequences”, no individual has lost their job “because we have not seen the need to do that. If we do, we’ve got very clear principles on it and we will make sure that happens,” Mr Narev said.

“we ended to do better,” Narev conceded. Picture: Kym Smith

INTEREST RATE BACKFLIP

Asked why Commonwealth Bank doesn’t offer interest rates that track the increases and decreases of changes in the official cash rate, Mr Narev replied: “The Reserve Bank cash rate is an important benchmark but a large number of funding costs exist irrespective of that benchmark. If we were to provide such a product, we would need to take into account all potential factors on the costs of funds.”

Mr Narev was challenged on CBA’s sneaky backtrack on increased term deposit rates, unveiled as a sweetener in August to the bank’s decision not to pass on the full Reserve Bank rate cut.

Last week, CBA quietly cut term deposit rates down to 2.4 per cent for one year and 2.45 per cent for two years.

Asked what the backflip “said about your behaviour as a bank if you would trumpet something at that time and then, less than two months later, change it”, Mr Narev insisted that the offer had only ever been temporary.

“At the time that we made our pricing decisions in August, we increased term deposit rates for products of one year, two years and three years,” he said.

“We never intended and we were very clear about this at the start, for those repriced deposits to continue indefinitely.”

Asked if he understood “why Australians would be cynical about your behaviour, when you’ve loudly drum-belted the increase in term deposits at the same time as not passing on an RBA interest rate cut, only to, less than two months later, pull back on two thirds of those changes”, Mr Narev said the bank was doing its best to explain its reasons.

FINANCIAL ADVICE

In his opening statement to the committee Mr Narev said he would pursue two key themes during the hearing — “strength and fairness”.

Mr Narev said the vast majority of his bank’s people come to work each day to do their best for customers, “but we also know we need to do better”.

He conceded an independent review found that one in 10 customers received inappropriate financial advice from the bank as he was quizzed by a federal parliamentary committee about the bank’s ongoing review of the scandal in its financial planning arm several years ago which led to the banning of some of its advisers.

He told MPs an independent report last week found of 8000 customers who asked for their financial advice to be reviewed, 6000 had been completed. It found more than 10 per cent of those were given inappropriate advice. The bank had paid out $11 million in claims since its initial payout of $52 million several years ago.

Mr Narev defended the time it had taken to resolve the matter and said it would be wrapped up by the end of the year.

The House of Representatives economics committee will seek documents on the bank’s internal investigation of the scandal as well as details on action taken by the bank to address it.

He said he had met with customers with experiences of being let down by the bank.

“I’ve done so in order to understand their experiences first hand,” he said.

“I’ve said before how sorry I am for the pain that we’ve caused them. I say so again today.”