SYDNEY (Reuters) - The Australian corporate watchdog said on Wednesday it filed a lawsuit against the country's biggest listed wealth manager, AMP Ltd (AX:AMP), accusing its financial planning arm of intentionally cutting clients' life insurance cover for higher fees.
"The financial planners stood to receive higher commissions ... whilst at the same time exposing the clients unnecessarily to underwriting and associated risk," the Australian Securities and Investments Commission (ASIC) said in a statement.
In a federal court filing made public by ASIC, the regulator said six AMP employees advised about 40 life insurance customers to take out new policies which involved downgrading their level of cover in exchange for higher commissions from 2012 to 2013.
By selling weaker insurance policies for higher commissions, AMP's financial planners had "failed to act in the best interests of the clients and to prioritize the interests of the clients", ASIC said.
The regulator said it was seeking fines and court declarations that AMP failed to take all necessary steps to ensure its planners acted "efficiently, honestly and fairly" and within the law.
AMP said it had been co-operating with an ASIC investigation into the practice of insurance "rewriting" since 2014 and that it would "file its defense in due course".
The wealth manager had removed authorization in 2014 from the only financial planner named in ASIC's filing, and reported the individual's conduct to ASIC in the same year, AMP added.
It said it was "apologizing to the customers impacted" and that "they are currently being compensated".