Watchdog corrects FSC chief Sally Loane’s evidence

Evidence given at the royal commission by FSC CEO Sally Loane has had to be corrected by an independent watchdog.

Financial Services Council boss Sally Loane.

Evidence given at the royal commission by Financial Services Council chief executive Sally Loane has had to be corrected by the independent watchdog tasked with policing the life insurance sector’s adherence to its code of compliance.

The independent Life Code Compliance Committee, which was launched by the Financial Services Council — the lobby group that represents the life insurance and wealth management sectors — was asked to provide information to the royal commission but did not appear in person to answer questions.

In submissions made to the royal commission’s round of hearings that probed the life insurance sector, the Compliance Committee, which is administered by the Financial Ombudsman Service, said it was forced to intervene after the evidence provided by Ms Loane needed correcting.

“It is the view of the committee this evidence contained some factual inaccuracies,” the committee said.

The committee had to supply “corrections of those inaccuracies” in the case of Ms Loane’s evidence regarding how life insurers became members of the code, how the committee responded to breaches of the code and why the committee had failed to take companies to task over breaches of the code.

Ms Loane said the body had not slapped any sanctions on insurers because the committee had not “actually reported on its first year” and therefore hadn’t yet made any findings.

“The committee has not imposed any sanctions under the code or its charter as there has been no basis upon which to invoke its powers to do so,” it said.

Ms Loane also told the royal commission she did not know whether any consumers had made complaints to the committee.

“While the committee does not question the accuracy of Ms Loane’s evidence … individual consumers have reported alleged breaches of the code to the Committee.”

Ms Loane’s lack of knowledge of the organisation’s flagship life insurance code of conduct and insurance law was exposed in an excruciating session at the banking royal commission last month. On numerous occasions, Ms Loane said she could not answer questions put to her as other staff members at the FSC were the ones who dealt with the area in question.

It comes as the Consumer Action Law Centre (CALC) said it “strongly supports” the findings of misconduct and conduct falling below community standards made by counsel assisting the royal commission Rowena Orr QC against insurance companies ClearView Wealth, Commonwealth Bank’s CommInsure division, Insurance Australia Group and Suncorp.

CALC also called for companies that sold accidental life insurance products to face charges of unconscionable conduct.

The largely useless insurance is riddled with exclusions and people are rarely able to claim on them. Over the past two years only 16 per cent of the money collected in premiums was paid out in insurance claims.

“Insurers have reported high decline rates, suggesting customers do not understand what they are buying,” CALC said. “The sale of these products in and of itself, and especially to vulnerable and disadvantaged consumers, constitutes unconscionable conduct.”

Although commissioner Kenneth Hayne’s interim report only covered the first four rounds of the inquiry — and not superannuation or life insurance — the Financial Services Council said the conduct of many firms had not been acceptable.

“The industry takes responsibility for the culture that led to some deplorable outcomes,” Ms Loane said last week.