Written by Viel Velasquez
On 28 February 2025, the New South Wales Supreme Court delivered its sentencing decisions in R v Allianz Australian Insurance Ltd and R v AWP Australia Pty Ltd, in relation to false or misleading statements made concerning financial products, namely travel insurance products.
Allianz Australia Insurance (Allianz), as the insurer and underwriter were fined $13.5 million, and AWP Australia Pty Ltd (AWP) as Allianz’s agent was fined $3.3 million.
Facts
In an agreement between AWP and Allianz, AWP was appointed as Allianz’s agent who became authorised to develop, manage, and sell travel insurance products on behalf of Allianz.
Between 2016 to 2018 it was found that both Allianz and AWP circulated information about its travel insurance policies on their respective websites that was false or misleading, in breach of sections 1041E(1) and 1311C(1) of the Corporations Act 2001 (Cth).
The maximum insurance benefits under the travel insurance policies were advertised on Allianz’s website. However, Allianz did not disclose to consumers the various sub-limits, terms and conditions, and exclusions to those benefits which was likely to mislead them as to their level of coverage under the policy. AWP made similar omissions when advertising their travel insurance policies on their websites.
The Court scrutinised Allianz’s processes and procedures in delivering their decision. Allianz was quoted an estimate of $25,000 and $30,000 for an external law firm to conduct a legal review on the advertisements made on their website. However, the General Manager at Allianz determined these costs to be significant and preferred an internal review of the website.
The Court ultimately found that both Allianz and AWP engaged in conduct that they ought reasonably to have known was false, or materially misleading and was likely to induce persons to acquire their respective insurance policies. In pleading guilty, Allianz was charged with six offences under the above provision at a fine of $2.25 million each (totaling $13.5 million), and AWP was charged with one offence at $3.3 million.
Lessons for Insurers (and Their Agents)
The conviction and criminal fines imposed on both Allianz and AWP serves as important lessons for insurance companies and their agents.
For one, careful consideration must be made in the manner in which insurance policies are advertised to ensure it is not false or misleading to other persons. Importantly, the wording of section 1041E(1) of the Corporations Act 2001 (Cth) does not require a person to actually be misled and it is enough that a statement is likely to mislead someone. Additionally, it is irrelevant if the offending conduct was not ‘deliberate’ or ‘dishonest’, as was the case with Allianz and AWP.
The second, and perhaps the key consideration is that “it is important that corporations take the steps at the highest level to ensure that proper processes are in place to prevent breaches of this kind”. Such processes may include obtaining an external review of the advertisement of insurance policies. This would allow for an independent assessment of a corporation’s risk and compliance, which may identify risks that an internal review might not. The Court pointed to the irony in that, had Allianz approved the external review for the cost of approximately $25,000 to $30,000 the breaches would have been identified prior to them occurring which would have avoided the subsequent fines.
Ultimately, consideration and caution should be exercised when limiting costs in reviewing compliance, as doing so may lead to significantly larger costs in the form of criminal fines, as was the case for Allianz and AWP.
Should you wish to discuss any of the above, please contact Sam Pennell on 03 9947 4543 or any member of the Ligeti Partners team on 03 9947 4500.
