Troubled financial group AMP continued to charge life insurance customers premiums on their policies after they had died, the financial services royal commission has heard.

AMP executive Paul Sainsbury told the commission on Monday that about 3000 clients had been charged almost $1 million for policy premiums after they had died.

The overpayments were returned to the policy beneficiaries – but there was no interest component to the repayments.

“You refund the premiums but the time value of money had gone to AMP’s benefit … [after you] charge premiums to someone who’s died,” Commissioner Kenneth Hayne said.

Mr Sainsbury agreed with counsel assisting Mark Costello that AMP had, in some cases, known premiums were being paid for 18 months after the policy holder had died.

Mr Sainsbury said that while the company knew it was charging the dead from at least 2016, it launched a review of the issue only in April this year – upon news that the Commonwealth Bank had charged fees to the dead.

“The question asked in AMP was ‘could this have happened to us?’,” Mr Sainsbury said.

Mr Costello asked whether he was referring to evidence about CBA fees being charged to dead people, which emerged in earlier sessions of the royal commission. Mr Sainsbury agreed that he was.

“You didn’t make APRA or ASIC aware of this in 2016?” Mr Costello said. “No,” was the reply.

“It was not breach reported in 2016 and it still has not been breach reported [to regulators]?” Mr Costello asked.

Mr Sainsbury agreed. He agreed also that AMP’s actions had been below community standards and expectations.

The commission also heard that AMP did not give insured superannuation fund members adequate opportunity to make it clear that they were non-smokers. The company set smoking rates as a default in group insurance, even if a customer had made not specific declaration of their smoking status.

Using one example where a customer had had only one opportunity to declare themselves as a non-smoker but, in fact, was not a smoker, Mr Costello characterised that as “eight years ago we sent you a letter and we have been charging higher premiums every year since”.

One customer took a case to the Superannuation Complaints Tribunal and asked for $72,000 in recompense. AMP rejected that claim.

One customer was charged $400 a month more than would have been the case if they were considered a non-smoker.