The cause of the wrongful deductions
106 The contravening conduct identified above essentially fell into two categories:
(1) Continuing to deduct premiums and advice fees following notification of a member's death.
(2) Failing to refund premiums and advice fees deducted between the date of a member's death and the date of notification of the member's death.
107 The witnesses called by the Defendants were able to provide limited evidence of the causes of the wrongful deductions. Many of the persons with executive responsibility and direct knowledge of the circumstances surrounding the contravening conduct were no longer employed by the AMP Group, including the individual who was the former Group Executive responsible for Wealth Solutions and Chief Customer Officer.
108 As explained below, based on the evidence before the Court, there were a number of factors which caused the contravening conduct. The product administration systems were not operating in a manner which gave effect to the terms of the policies upon the death of a member. Part of the issue was the lack of interface between the product administration system and the systems on which member death notifications were recorded. Another contributing factor was the decentralised manner in which complaints were handled within the AMP Group which resulted in a system that was incapable of identifying systemic and enterprise wide issues and, as a result, the problems with the product administration systems went undetected.
109 The evidence establishes that the deductions of premiums after the date of notification of death stemmed from a systems design issue in the U2 system for corporate plans which did not facilitate the cessation of deductions for premiums in respect of a particular member whilst keeping the group policy on foot.
110 Mr McPherson was appointed to the role of head of MasterTrust Operations in around July 2021, at which time he became responsible for operational aspects of products that included some of the superannuation products the subject of these proceedings (including Flexible Lifetime Super, Custom Super, Signature Super, Super Leader and AMP Flexible Super). MasterTrust Operations is responsible for the design and enhancement of systems and processes to support those products. Those systems include the product administration system U2.
111 Mr McPherson's evidence was that, before mid to late 2018, no review had been initiated in relation to improving any system or process relating to deduction and refund of premiums or advice fees and that, prior to that time, his team was not responsible for those processes.
112 From around late 2018 to mid-2020, Mr McPherson was the Operations representative on the deceased customer project covering MasterTrust Operations (including the superannuation products the subject of these proceedings). It was through Mr McPherson's involvement in that project (including his involvement as a member of the project's steering committee) that he gained knowledge of the issues that had been identified in the systems and processes that had been in place to manage the superannuation products and the way in which those processes and systems required rectification.
113 Mr McPherson's evidence was that the U2 system needed significant operational development and upgrade in order for automated steps to be included in its operation. Initially, from around September 2018, the steps to improve the processes for products on the U2 system were manual in nature. The automated system changes were ultimately implemented in the U2 system in around March 2020. These automated system changes included:
(1) automation of the cessation of premium and advice fee payments from a deceased member's account by installing a "flag" which was updated with the date of notification that a member had died once notification had been received; and
(2) once the flag was updated on a member's account:
(a) any insurance premium and advice fee deductions halted; and
(b) any insurance premiums and advice fees that had been deducted in the period between death and notification of death were refunded to the deceased member's account prior to the calculation of any amounts payable from the member's account to their representative or beneficiary, including the death benefit.
114 From 1 May 2019, AMP implemented controls to ensure the effective operation of its Deceased Customers Policy across the AMP Group. In June 2019, a weekly monitoring process was implemented to identify any instances of the continuing deduction of premiums or advice fees from the accounts of members whose death had been notified in the previous week. Since the controls were implemented, few instances where deductions have continued have been detected. Examples of instances where they have occurred involved instances where the automated system was overridden because the account had at one time been exposed to fraud.
115 Mr McPherson's evidence was that process changes relating to advice fees took longer to resolve because those changes affected the Authorised Representative advisers as well as the AMP Group entities. Some advisers considered that they were still providing a level of service to deceased member accounts by supporting deceased member beneficiaries in respect of matters such as submitting death claims and changing investments after date of death. The Court observes that it appears to be agreed that the contract between the deceased member and the Authorised Representative came to an end upon the member's death and did not provide for the charging of fees for such services. However the Court also observes that the admitted unconscionable conduct relates only to those files in respect of which no provision of service after notification of death could be identified.
116 Based on the evidence of Mr McPherson, it is unclear which team within AMP was responsible for the process for deduction and refund of premiums and advice fees in relation to deceased members prior to mid-2018. The evidence filed by the Defendants does not provide any details about the how the errors relating to the process for deduction and refund for premiums and advice fees in relation to deceased member accounts occurred and who was responsible for it. Nor does the evidence explain why, prior to 2019, there was no process for monitoring the operation of the system with a view to ensuring that the system was operating correctly in relation to deceased member accounts.
117 Evidence relating to the Compass system was given by Ms Dharmapala. During the Relevant Period Ms Dharmapala was the manager of the team administering claims relating to the legacy AXA products at AMP Life. These products were administered on the Compass product administration system. Ms Dharmapala had experience with the Compass system and the processing of death claims on that system from around June 2009.
118 Ms Dharmapala described the steps that a claims administrator was required to take on receipt of a death claim between 2011 and September 2018 in the following terms:
(1) A death claim was notified to a claims administrator via the WMS. The claim was entered into the WMS by anyone who received the notification, whether they were part of the claims administration team or otherwise, and would typically have originated from either a call to the call centre, receipt of hard-copy mail, or an "Enquiry for Claim" (a work type logged directly onto the WMS to notify the claims administration team that an intention to claim had been received).
(2) The claims administrator used the policy number contained within that information to cross-check the information about the policy-holder held on Compass. This included checking the member's name, date of birth, employer, nature of the cover, and whether there was a superannuation component attached to the life insurance policy.
(3) The claims administrator flagged on Compass that a death claim had been notified. This was done by the claims administrator manually changing the client's status in Compass from "active" to "received death claim". The changing of the client's status in the Compass system had the effect of immediately freezing the billing of any charges, including premiums and any fees, to the member.
(4) Once the client's status had been changed, the claims administrator then manually arranged to send out the claim requirements, which was a letter setting out the documentation required to support the claim in order for it to be assessed and a determination to be made by the trustee regarding the beneficiary or beneficiaries to receive distribution of the benefit.
(5) The claims administration team then waited for the response from the member's beneficiary or representative enclosing the documentation to support the claim, such as a death certificate. Once this information was received from the member's beneficiary or representative, the claims administration team confirmed all the necessary information had been received and, if so, completed a portfolio switch via Compass. This process of completing a portfolio switch was manual and required the claims administration team to secure, at that point in time, funds from the member's investment account and switch it to a low-risk account.
(6) After the claim had been assessed by the case management team and the trustees had made a determination, the claims administration team received an application for the payment of the policy. The claims administration team then manually determined one aspect of the payment to be made to the client, being the "anti-detriment amount", which was entered into Compass. The anti-detriment amount was an additional lump sum amount paid to the beneficiary or beneficiaries of the deceased member refunding 15% of contributions tax paid by the member during their life. Other amounts for payment were either determined by others (including the case management team) or were generated automatically by the system. Compass then calculated the final payment amounts, which involved complex processes including unit pricing calculations. Once payment details were entered and processed, the case in the WMS for that claim was closed.
119 Although Ms Dharmapala had understood that the Compass system, as part of the process of calculating the final payment amount, refunded amounts of any premiums and fees deducted after the member's date of death, she became aware in September 2018 that Compass did not automatically calculate such refunds. The claims administration team was then given responsibility for manually refunding premium amounts deducted after the date of death as part of the process of finalising a death benefit. Ms Dharmapala did not refer to a process for manually refunding advice fees.
120 Ms Dharmapala did not have direct experience with the U2 system prior to July 2019. Her understanding of the way that system operated was derived from discussions with others and her learnings from July 2019. Her understanding was that, up to September 2018, the U2 system did not operate to freeze deductions from a member's account once that member was manually flagged in the system as deceased.
121 As part of the roles held by Ms Dharmapala at AMP Life, she regularly interacted with representatives of beneficiaries who were submitting death claims and, from time to time, she and members of her team received complaints about aspects of the claims process. Ms Dharmapala and her team tried to resolve complaints within five days. However, if the complaint involved an issue which meant it could not be readily resolved within that time frame, the complaint was referred to the AMP Life complaints team. Ms Dharmapala logged complaints she received into the Salesforce (a customer relationship management system) or WMS systems. When Ms Dharmapala authorised a payment made to resolve a complaint, the fact that the payment had been made was also logged into the respective system. Ms Dharmapala did not recall ever receiving a complaint from a member's representative or beneficiary about a failure to refund premiums or advice fees deducted after a member's death to that member's account, or the final amount of a death benefit.
122 Ms Dharmapala's evidence was that, when payment of a death claim was made, a letter was issued by the claims administration team to the beneficiary or deceased member's representative setting out the amount of the payment, the accumulation amount in the deceased member's superannuation account, any life insurance benefit, any anti-detriment amount, tax and the net benefit payable. The letter did not separately disclose any refunded premium payment amounts. It could not be discerned from the face of the letter whether premiums deducted after the date of death had or had not been refunded.
123 It is apparent from Ms Dharmapala's evidence that those administering death claims had assumed the system was operating to refund premiums deducted after death and that no deductions were being made from member accounts after a member's death was recorded in the system. In fact, absent a complaint being made, the system did not disclose the necessary details to the claims administrators to enable them to see whether amounts had been deducted after the date of death and whether refunds of those amounts had been made. There is no evidence of any periodic testing or auditing of the systems in relation to the refunds of amounts on account of premiums or advice fees following the death of a member.
124 It is also apparent from Ms Dharmapala's evidence that, although notification of a member's death was logged in the workflow system, the notification of death was not thereupon automatically recorded in the product administration system (either Compass or U2), which was the system recording and processing deductions from member accounts. Although claims administrators accessed both the workflow management systems and the product administration systems, those systems did not interface with each other. A claims administrator entered a death notification into the product administration system at the start of processing a death claim which was after the AMP Group received and recorded the notification of the death in the workflow system.
125 Furthermore, before late 2018, AMP's complaints monitoring system and processes did not identify that there was a systemic issue that resulted in the failure to properly refund to a member's account premiums or advice fees deducted after a member's death before death claims were ultimately paid.
126 Ms Taylor expressed the opinion that the primary reasons why the complaints monitoring system did not detect this systemic issue were as follows:
(1) The AMP Group did not have holistic oversight of complaints. There was no enterprise-wide sharing of complaints data, at a management level or frontline level, that would have enabled the analysis of that data to identify possible systemic issues. The complaints monitoring system across AMP was decentralised, consisting of approximately 18 separate complaints management teams with different business units within AMP using different and distinct systems and processes to record and manage complaints.
(2) There was no quality assurance of closed complaints to ensure that complaints were managed and resolved effectively and that any systemic issues were flagged for further consideration.
127 Ms Taylor accepted in cross-examination that there was no evidence of internally identified systemic issues appearing in any management or board reporting and that the AMP Group did not during the Relevant Period have a centralised complaints function. Ms Taylor's role as Head of External Dispute Resolution was to effectively centralise external dispute resolution. Part of that centralisation involved putting in place a centralised complaints system using Salesforce. Ms Taylor's evidence was that, prior to late 2019, there was no process or mechanism by which a person handling a complaint could flag that a particular complaint may have been the result of a systemic issue.
128 I accept Ms Taylor's evidence.
129 As set out above, the staff involved in handling complaints and in requesting the improvement to the system in 2016 were relatively junior. The respective boards of each of the Defendants were first notified of the conduct the subject of these proceedings in the second half of 2018. The manner in which complaints were handled seems to the Court to reflect an organisational assumption that complaints would be the result of ad hoc issues and mistakes rather than a result of a systemic issue. That assumption was wrong.