The Federal Court has ordered Allianz Australia Insurance Ltd (Allianz) and AWP Australia Pty Ltd (AWP) to pay penalties of $1.5 million in relation to the sale of travel insurance policies through Expedia websites.
The Court imposed the penalties after finding Allianz and AWP engaged in misleading and deceptive conduct when selling travel insurance by failing to correctly state how premiums were calculated and by allowing insurance to be sold to ineligible customers.
ASIC Deputy Chair Sarah Court said, ‘ASIC is committed to improving the outcomes for Australian consumers who purchase insurance. The insurance industry needs to be transparent and accurate when selling and promoting their products.’
The Court also found Allianz and AWP had breached their financial services licence obligations by:
- Allianz failing to correctly disclose how premiums were calculated in product disclosure statements so that consumers were not given accurate information on the travel insurance they were purchasing
- Allianz and AWP failing to prevent the sale of insurance on Expedia websites to consumers who were ineligible to make claims under the policies, and
- Allianz and AWP failing to prevent Expedia websites from misusing a quote from the Department of Foreign Affairs and Trade about the importance of purchasing travel insurance.
‘The community expects that the insurance industry will promote and sell products in a transparent way. People take out travel insurance for peace of mind and to protect their families. 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. ASIC remains committed to ensuring that consumers’ experience matches that expectation’, concluded Deputy Chair Court.
In his decision, Chief Justice Allsop observed that:
‘In circumstances where the contraventions arose from careless omissions and failure to closely monitor the sale of insurance products on partner websites (namely, the Expedia 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.’
The Court acknowledged Allianz and AWP’s efforts to make early admissions of liability and took this, and other relevant considerations, into account in determining penalty.
AWP was ordered to pay $1,140,000 and Allianz $360,000 and have also been ordered to pay ASIC’s costs.
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Background
As well as the civil action against Allianz and AWP addressed by the court today, criminal charges have been laid against both Allianz and AWP alleging the making of false statements (21-029MR).
ASIC has also overseen a remediation program by Allianz and AWP. ASIC secured $10 million in customer remediation from Allianz and AWP for travel insurance potentially mis-sold to around 31,500 consumers through Allianz’s own website and those of its distribution partners, including Expedia (20-264MR).
Allianz and AWP are owned by the same parent company, the Germany-based Allianz SE. Allianz issues insurance products, including travel insurance products, to consumers in Australia. AWP is responsible for the development and sale of travel insurance products issued by Allianz.
The civil penalty proceeding concerns travel insurance products described as 'integrated' products. The insurance policies were sold through the Expedia websites upon the purchase of another travel product (for example, flights) and so were much like 'add-on insurance' products. Towards the end of the purchase path of the travel product, the customer would be prompted to add travel insurance to their purchase.
ASIC commenced these civil proceedings in September 2020 (20-227MR).