Insurance group Allianz requested an external report into its compliance procedures be changed, the financial services royal commission has heard.
Earlier in the week, the commission heard Allianz had sold more than two million insurance policies through online channels that included information described as “misleading and deceptive” by counsel assisting Rowena Orr QC.
The offending material remained in place for up to six years because the company had not prioritised its removal.
On Tuesday, Allianz chief risk officer Lori Callahan told the commission the company called in consultants Ernst & Young in 2017 to review its compliance and remediation procedures.
Ernst & Young returned with the view that there was an “overarching sentiment for under-resourcing for compliance personnel” within Allianz, and “day to day activities are dominated by reactionary work such as remediation and responses to incurred incidents and breaches”.
“As a result, the operation of the compliance function is reactive in nature instead of proactive, and there is currently limited focus on emerging compliance risks,” Ernst & Young said.
Ms Callahan said she saw nothing wrong with the report, although she was not the company’s chief risk officer when it was released.
Allianz gave Ernst & Young its views on the report and the consultants amended their assessment.
In the first report, six areas of operation were considered “evolving” and four “established”. After Allianz’s feedback, this changed to seven that were “established” and three “evolving”.
There was further pushback and Ernst & Young altered its report again.
“Did it occur to anyone at Allianz that a better way to improve its ratings might be to improve its compliance systems, rather than pushing back on the findings of external reports?” Ms Orr said.
Ms Callahan said the consultants’ report had become tougher in some respects.
“It was interesting to me the number of recommendations had increased from 27 to 35, and they had become more directive,” she said.
Ms Callahan told the commission that despite her investigations in the company since taking over, she was unable to outline incidents that needed to be reported to regulators.
“You’re not able to assist the commission to understand in any way the approximate number of incidents, compliance incidents, at Allianz, that you are not satisfied have been assessed for reportability to ASIC?” Ms Orr said.
Commissioner Kenneth Hayne chipped in: “I am a little surprised that you cannot give me any indication of the size of the task?”
“We have retained an external resource to assist us in that, and that resource is helping us right now to identify the methodology that is needed to go through those,” Ms Callahan replied.