Partner Sydney
"Australians who purchased these travel insurance products would have assumed that ‘unlimited cover’ meant exactly what it said."
Allianz pleaded guilty to the charges, which were laid in September 2023 and relate to disclosure in relation to travel insurance products available on the online platform, which it hosted and managed, between February 2016 and June 2018. The offences were that Allianz disseminated information which it should reasonably have known was false or ‘materially misleading’ and that this information was likely to induce Australian consumers to buy financial products.
How were the details ‘materially misleading’?
The travel insurance products offered through the Allianz platform were stated to provide ‘unlimited cover’ for overseas medical, dental and hospital expenses. The details did not disclose that this ‘unlimited cover’ was subject to policy sub-limits and conditions, restrictions and limitations which contradicted the offer of ‘unlimited cover’. This was ‘materially misleading’ because Australians who purchased these travel insurance products would have assumed that ‘unlimited cover’ meant exactly what it said.
"The court used the total turnover of Allianz for the same period of AU$4.375bn as the basis for the fine."
Although Allianz pleaded guilty to the charges, the court analysed its conduct before it did so and even after it ceased to offer these travel insurance products online. In doing so, the court considered internal and external legal advice to Allianz, internal discussions and meetings and Allianz’ policies and procedures. Based on this detailed analysis, the court concluded that Allianz had inadequate internal processes and procedures to monitor its online content and disclosure and to ensure compliance with applicable laws and regulations. This included analysis of internal records and meetings at which steps to undertake internal and external legal, regulatory and compliance reviews were considered.
Paying the price – penalties and fines
On conviction, the penalty for each offence is the greater of 45,000 penalty units and 10% of the annual turnover of the corporation. One penalty unit is currently AU$330 (approximately US$205). The court rejected Allianz’ attempts to limit its turnover to its travel insurance division between February 2016 and June 2018 of approximately AU$2.7m (approximately US$1.7m). Instead, the court used the total turnover of Allianz for the same period of AU$4.375bn (approximately US$2.7bn) as the basis for the fine. The court allowed a 25% discount on the total fines because Allianz pleaded guilty at the earliest opportunity and cooperated with the prosecutors.
"Do your internal procedures and policies meet this test?"
Key take-aways from the judgment
- in such prosecutions, the starting point will be whether the court considers the consumer disclosure to be accurate and transparent;
- a guilty plea and cooperation with the prosecutors and regulators may limit but are unlikely to prevent a detailed and public judgment or detailed and thorough scrutiny of internal and external conduct and communication;
- the courts will analyse and assess internal procedures for compliance and review to determine whether internal procedures and policies are adequate and appropriate in the context of the alleged misconduct;
- the court emphasised that the breaches could have been avoided if Allianz had proceeded with an external legal review in February 2016. The court did not indicate that an external legal review was always appropriate, the key is for the court to be satisfied that internal review procedures and policies are sufficiently robust and independent to identify and rectify breaches and misconduct such as misleading content in consumer disclosure. Do your internal procedures and policies meet this test?;
- records of ongoing, regular and robust reviews of online content and disclosure can play a critical role in responding to claims of misconduct such as misleading and deceptive conduct; and
- damages total turnover not just travel insurance sales.
