In a recent report, titled FSU Audit Report: Pay at CBA, the Finance Sector Union (FSU) called on CBA to abolish its remuneration structure because it is pressuring staff to push products that are not in customers’ best interests.
ifa reported in April that the Australian Bankers’ Association (ABA) had unveiled a raft of new consumer protection measures, which included a review of banks’ product sales commissions.
In response to the FSU report, a CBA spokesperson said, “CBA is fully committed to the ABA initiatives announced in April, one of which is an industry-wide review of remuneration and incentive models overseen by independent expert Ian McPhee AO, a former Commonwealth Auditor-General.
“If the review finds product-based sales commissions or payments, which could result in poor customer outcomes, they will be removed or changed. Following the completion of the review, CBA is committed to ensuring we have overarching remuneration principles that continue to support good customer outcomes.”
CBA also said that other claims in the FSU report, such as underpaying staff, do not correlate with the bank’s own survey of 80 per cent of employees.
“As part of our compliance activity, we regularly conduct checks to ensure all our employees are paid at the higher of the relevant Enterprise Agreement [EA] or Banking, Finance and Insurance Award minimum rates,” a spokesperson said.
“In addition, despite not reaching agreement for a new EA, in 2015 the Group awarded a 3 per cent pay increase to everyone whose pay is regulated by the EA, provided they met minimum behaviour and compliance standards.”
According to anonymous quotes in the FSU report, some CBA employees feel pressured to recommend unnecessary products to customers.
“I have seen situations where staff felt pressure to push products and services to meet expectations that were not in the best interest of the client,” one comment noted.
Another respondent said that “by having a huge emphasis on bonuses, I feel it pushes people to focus predominantly on targets rather than the customer and level of service, which goes against the bank’s vision”.
FSU said the identity of the respondents is kept anonymous because the union has “no confidence in CBA’s whistleblower policy”.
Lets see if ASIC makes a comment or takes some action
fair call
Yep, Peter, I think you’re being cynical.
The ‘musical chairs’ as you call it, would come at the cost of a commission payment (currently over 100% of premium) as well as the cost of admin to get on books (including underwriting). Add to that, that you have to be in good health to get through the new underwriting process, as you point out this means less likely to claim, I think your argument breaks down .
You know, churning and life insurance is a bit llike ‘musical chairs’. No insurer wants to be left holding a policy when the music stops (whoops – I mean when a claim arises). The longer an insurer holds a policy, the greater the risk of a claim. Therefore, perhaps there is an arguement that insurers like to see policies constantly being moved around. All insurers benefit because they get a new batch of life insureds that have all gone through the underwriting process, rather than holding on to clients for the longer term. I don’t know; perhaps I am just becomeing a bit cynical.
CBA aren’t the only company that have conflicted remuneration structures in place – although I am very aware from close experience how intoxicating and inviting their bonuses are for their middle and executive management.
If you want to be completely transparent about this whole ‘conflicted remuneration’ issue, then every single life insurance company, that openly accepted large amounts of new business, that they knew (damn well) was being churned by a small percentage of unscrupulous (but apparently too – well known) advisers, are equally to blame for the whole trumped up, falsely reported ‘churn’ issue that was driven by a conflicted remuneration tag.
BDM’s and their direct and senior management were knowingly accepting business for years that was clearly being moved from one insurer to the next, year after year for the fiscal fruits that followed – even though the application forms clearly showed ‘the business’ had been written elsewhere around a year before.
Funnily enough, when the business walks out the door 12-15 months later, after the bonuses have all been paid, THEN its an issue of major concern and the ‘whole adviser industry’ gets the blame. What should have been stopped at application stage wasn’t because of the pressure put on by management to get the business to achieve budget and the bonuses that follow.
If you want to talk about conflicted remuneration ASIC – don’t just look at CBA; they’re not the only perpetrators.