ANZ's $117M mis-selling settlements ruled uninsurable — the bank eats repayments in full

Two class actions caught ANZ charging customers in ways they never agreed to. The Reilly proceeding, settled for $31.92 million, targeted consumer credit insurance sold to credit card and personal loan customers: some never asked for it, some never understood they had it, and some were told it was compulsory when it was not. ANZ collected the premiums, kept a 20% commission, and passed the rest to its subsidiary underwriters OnePath Life and OnePath General.

The O'Brien proceeding, settled for $85 million, exposed flex commissions in car loans arranged through ANZ's Esanda business: dealers could set the customer's interest rate above ANZ's base rate — one Sydney buyer approved at 8.35% was charged 12.38% — and the higher the rate, the more commission the dealer earned. Neither the commission structure nor the dealer's role was disclosed to borrowers.

ANZ then turned to its excess insurance tower — three layers above a $50 million primary layer, providing up to $200 million of additional cover, arranged by its broker Aon and underwritten by Zurich, Lloyd's syndicates, XL, AIG, Liberty Mutual and AXIS for the year from September 2017. The underwriters refused to pay, and on October 9, 2026 the Federal Court backed them on every count: none of the settlement payments, and none of the defence costs, qualified as 'Loss'.

The policies carved out 'fees, commissions, or other charges paid or due to the Insured', and the court held that premiums are charges, interest is a charge — ANZ's own disclosure documents describe it as 'charged' — and the 20% commission is, on its face, a commission. An insured does not suffer a loss, the court said, when it repays something it should never have received. Exclusion 11 would have blocked cover anyway for claims involving excessive, undisclosed or improper charges, and the policies were drafted by ANZ's own broker, so ambiguity could not be read against the insurers.

$117M in settlements — $85M (O'Brien) and $31.92M (Reilly) — plus defence costs, all borne by ANZ after the court voided insurance recovery.

Add-on insurance was sold to customers who never asked for it, did not understand they had it, or were told it was compulsory when it was not.

Esanda's flex commissions let dealers raise the customer's interest rate above ANZ's base rate to earn more, without disclosing the structure or the dealer's role.

The bank treated the resulting redress as someone else's bill, claiming under an excess tower even though the settlements repaid money ANZ itself had collected.

Money you took from customers and must pay back is not an insurable loss. Policies carve out your own fees and commissions, so redress comes from your own balance sheet.

The judgment was handed down on October 9, 2026, with the court indicating willingness to grant ANZ leave to appeal given the significance and finality of the ruling. As it stands, ANZ absorbs the full $117 million in settlements plus years of defence costs across both proceedings. For financial institutions, the decision draws a hard line: where a claim is fundamentally about the return of money the insured collected through its own products and services, there is no insurable loss, regardless of how the underlying claimants frame their case.