The Australian Securities and Investments Commission (ASIC) released the findings of its investigation into CommInsure’s claims handling procedures in a public report today.
The investigation followed joint Four Corners and Fairfax Media reports in March 2016, which alleged the insurance firm had deliberately denied claims and pressured doctors to alter their medical opinions.
While no breaches of the law were uncovered, the corporate watchdog said CommInsure’s trauma policies had outdated medical definitions for heart attacks and severe rheumatoid arthritis.
By law, it is not illegal to sell consumers policies with outdated medical definitions, but ASIC said this is “clearly out of step with community expectations” and that it is unreasonable to assume consumers know which medical terms are or aren’t out of date.
According to ASIC, this is an industry-wide issue which the Government is already considering taking action over in response to a recommendation in the Financial System Inquiry.
“As life insurance is a long-term product, a consumer can end up with a life insurance policy where previously current medical definitions have become out-of-date over time,” ASIC said in their report.
“This occurs because life insurers are legally required to maintain a consumer’s cover, and cannot easily update a policy or change its terms.”
In response to the report, CommInsure said it has “carefully considered” ASIC’s commentary and will extend its updated heart attack definitions to include customer claims from October 2012.
“We believe this is the right decision for our customers in the absence of consistent definitions across the industry,” CommInsure said.
CommInsure also pointed out that ASIC found no evidence to prove that it had:
- Pressured doctors into changing or altering their medical opinions
- ‘Cherry picked’ doctors to give preferred medical opinions
- Breached the law in relation to claims handling
- Altered or deleted medical opinions stored on the database (only the Medical Risk Team were allowed to do this), other than for administrative purposes
ASIC’s investigations into whether CommInsure’s marketing for its life insurance policies contained misleading or deceptive information is still ongoing.
What has CommInsure done in response?
CommInsure has now back-paid a total of $2.5 million to 17 eligible customers, dating back to May 2014.
CommInsure has updated its medical definitions regarding heart attacks and severe rheumatoid arthritis, and will apply this definition to claims that date back to October 2012, which is when the push to change these definitions began.
Furthermore, CommInsure has agreed to work with ASIC to ensure consumers are communicated with more effectively, and claim managers are extensively trained and assisted to handle any future issues.
The ASIC investigation
The ASIC investigation included a review of 60,000 obtained documents and emails and interviewed a range of individuals, including customer representatives.
ASIC also documented that while many of these issues have been highlighted by CommInsure’s case, it is representative of industry-wide issues.
The Government agreed that the exemption for insurance claims under the Corporations Act will be reviewed, as well as reviewing the penalties for misconduct.