Commonwealth Bank CEO Ian Narev concedes an independent review underway at his bank has found one in 10 customers has received inappropriate financial advice and there have been problems with the insurance arm, CommInsure.
He's the first of the big four bank chiefs to address the House of Representatives economics committee's banking review, set up as an alternative to a royal commission into the industry that the Labor Party is calling for.
Labor MP Matt Thistlethwaite, who is on the House of Representatives Standing Committee on Economics, says that scandals in the banking and financial services industry have depleted retirees' savings, taken advantage of families and resulted in life insurance policy holders being denied justice.
He's cited examples, including allegations of interest rate-fixing in the banking sector and insurance policies being refused.
"Isn't this the problem, that there is a culture of bad behaviour in your bank and in banks more generally in Australia at the moment, particularly around selling insurance products and selling financial products that aren't in the best interests of your customers?"
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Ian Narev says there is already a comprehensive internal review taking place at the Commonwealth Bank into the widespread financial misconduct by financial planners it employed and into the practices of its insurance arm CommInsure.
The bank has so far paid out $52 million in compensation to affected customers.
Mr Narev says it is moving as quickly as it can to investigate what went wrong but has admitted that its investigation will undoubtedly find more cases that have not yet been discovered.
"As we do this work, I expect there will be cases of more poor customer outcomes and there will undoubtedly be more announcements regarding compensation due to customers, which will include some significant monetary amounts given the scale of our business and the length of time we will go back to make things right. Critics will paint these as signs of ongoing problems. Actually, they're signs of how serious we are about fairness."
Mr Narev says the bank has also put in place a program to investigate allegations against CommInsure.
Labor committee member Pat Conroy cited more than half a dozen cases where claims were refused after claims managers simply rejected medical findings.
He recalled one when a woman's family was denied payment for what CommInsure declared to be a suicide case, even though the coroner had already ruled it an accident.
Mr Narev told Mr Conroy that decision was a mistake.
Narev: "The bank needs to be doing a better job at those sorts of circumstance."
Conroy: "But how can the bank simply maintain it was a mistake when the claims assessor post their initial claim clearly ignored a coroners finding and a death certificate? That's not a mistake a mistake is losing some-ones paper work. It is not a mistake to say as a claims assessor, 'I know more than the coroner.'"
Narev: "I haven't yet been made aware that any claims manager willfully ignored a determination of the coroner. What I have been made aware of to date is that based on the circumstances of the case the claims manager made a conclusion that was mistaken."
Mr Narev has also defended that commissions are paid to his staff for selling products.
He say the bank is co-operating with the Australian Bankers' Association review of commissions, led by former commonwealth auditor-general Ian McPhee, to remove areas where there could be a perceived or confirmed conflict between the interests of the customers and the interests of the bank.
The committee will question Westpac, ANZ Bank and the National Australia Bank in the next few days.
