September 18, 2018 / 7:56 AM / 8 months ago

Allianz's Australian unit handed back unfavorable governance report: inquiry

SYDNEY (Reuters) - An Australian inquiry into financial sector misconduct heard on Tuesday the local insurance unit of Germany’s Allianz SE commissioned an independent review of its culture, but then handed the report back because it didn’t like the findings.

Flags with the logo of Allianz SE, Europe's biggest insurer, are pictured before the company's annual shareholders' meeting in Munich, Germany May 3, 2017. REUTERS/Michaela Rehle

The year-long inquiry, called a Royal Commission, is investigating the insurance industry after revealing widespread wrongdoing in the consumer credit, rural lending, small business banking and pension sectors in previous hearings.

The German insurer had come under pressure earlier in the week after conceding it sold travel insurance that promised unlimited emergency medical cover anywhere in the world, when the actual policy had limits on both cost and location.

Allianz Australia chief risk officer Lori Callahan told the inquiry on Tuesday the company had commissioned accounting firm Deloitte in June to undertake an independent review of its compliance systems in response to an order by the prudential regulator.

Under questioning, Callahan said she later asked Deloitte to retract the report because “it didn’t fulfil what I wanted to know”.

The inquiry heard that a draft document given to Callahan heavily criticized the culture of the insurer and its compliance systems.

The draft report was withdrawn as requested and Allianz then increased the scope of Deloitte’s review to include other governance issues.

The inquiry also cited notes from a voice message Callahan left at Deloitte asking it to retract the report, saying: “Document expresses broad statements and judgments which may conflict with other materials including potentially what Allianz has told regulators”.

A spokeswoman for Deloitte said the firm had retracted the draft report while it continued to engage with the company.

“At no point was the report altered or changed by Deloitte,” she said in an emailed statement.

The inquiry also heard on Tuesday that Allianz unsuccessfully tried to alter the conclusions of a second risk report completed by Ernst & Young.

Ernst & Young did not immediately respond to requests for comment on Tuesday.

Allianz is one of the first overseas firms to get caught up in the Royal Commission, which has largely focused on the poor behavior of Australia’s biggest banks and wealth managers.

Earlier in the week, the inquiry heard that TAL Life, owned by Japan’s Dai-ichi Life, stopped insurance pay-outs to a woman with cervical cancer because they argued she had voided her contract after failing to disclose a prior history of depression.

Reporting by Paulina Duran in SYDNEY; Editing by Jonathan Barrett and Robert Birsel

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