Mr Ferrari said the rise in class actions had contributed to the “escalating cost of doing business” in Australia and pushed professional indemnity insurance premiums up as global reinsurers did not want to take on the risk.
“Ultimately, that will result in a higher cost of doing business which will result in job losses and higher costs being passed onto consumers.
Litigation funders are private companies that bankroll class actions in exchange for a slice of the settlement. Proponents say they take on the risk necessary to hold corporates to account but critics argue opportunistic lawsuits are used to pressure companies into accepting large settlements to minimise the impact on their reputation.
Attorney-General Christian Porter launched a parliamentary inquiry to examine all aspects of the class action system in May, citing “enormous profits being made by litigation funders” as a key area of the probe.
Treasurer Josh Frydenberg soon after made it compulsory for litigation funders to hold an Australian Financial Services Licence in an effort to boost transparency and accountability for companies.
Mr De Ferrari welcomed the requirement for funders to be licensed. “That would require them to act in the best interest of plaintiffs, which [is] not true I believe with the set up we have today.”
AMP appeared before the committee to provide an update on changes implemented following Kenneth Hayne’s scathing royal commission that revealed thousands of dead customers were continuing to be charged fees.
Mr De Ferrari said the solution to adviser misconduct was greater use of technology and said AMP had boosted the frequency of aligned adviser audits and was rolling out a mandatory technology platform that enabled greater monitoring of operations.
“How do you supervise conduct risk on a workforce of 24,000 licensed advisers operating across Australia? It’s a journey and ultimately we’ll get there with better technology.”
Mr De Ferrari also provided an update on customer remediation, saying AMP had paid over roughly 62,000 clients a total of $241 million out of the total $800 million provision.
Charlotte is a reporter for The Age.