Banking royal commission: CBA rejected heart attack claims, misled ombudsman

CBA denied the life insurance claim of a customer who suffered a heart attack and misled the ombudsman about its action.

Former CommInsure head Helen Troup leaves the royal commission in Melbourne yesterday. Picture: Aaron Francis

Commonwealth Bank denied the claim of a life insurance customer who suffered a heart attack by using out-of-date medical definitions and then misled the Financial Ombudsman Service by covering up advice it had received from a doctor when the customer complained.

CBA also ignored the ombudsman’s findings that it should apply an updated medical definition to the claim, in a series of repellent manoeuvres revealed by the financial services royal commission yesterday that the corporate watchdog labelled “serious misconduct” but failed to take action against.

The royal commission also revealed how CBA routinely ignored the medical advice of its own employed doctors, including its chief medical officer Dr Benjamin Koh who blew the whistle on the company’s misconduct in 2016, to update its definition of heart attack, and routinely rejected related claims because it would cost the company more money.

The revelations came as senior counsel assisting the commission, Rowena Orr QC, for the first time put on the public record a ranking of the worst life insurance companies in terms of knocking back claims and making customers wait for a decision — up to half a year in the case of Westpac.

Suncorp took the crown for rejecting the most life insurance claims, at more than 4 per cent of all claims, and also for the worst decline rate for total and permanent disability claims, knocking back almost one in 10 claimants. Zurich followed with a denial rate of 9.6 per cent, then National Australia Bank’s partly owned MLC life insurance with 8.3 per cent.

And it turned out to be another bruising day for Commonwealth Bank, whose reputation has already been shattered by Kenneth Hayne’s inquiry, as the royal commission heard how CBA’s life insurance division CommInsure purposefully deceived the sector’s complaints body. Previous rounds of hearings have detailed the bank’s thousands of criminal breaches of the law by failing to comply with superannuation laws, its fees-for-no-service scandal, which included the charging of fees to dead people, and its attempts to strongarm financial regulators.

CBA sold CommInsure for $3.8 billion 12 months ago to Hong Kong-listed AIA Group, but the bank has retained a distribution agreement. Yesterday, the commission heard CBA knocked back a customer’s heart attack claim, and when the customer made a complaint to the Financial Ombudsman Service, CBA supplied the external body with partly blacked-out documents.

The redacted information supplied to FOS concerned a doctor’s medical opinion that found in favour of the claimant, but when FOS asked for an explanation of the missing details, CommInsure refused.

Commonwealth Bank declined a specific FOS request to provide a medical report, which former CommInsure boss Helen Troup admitted conveyed the impression that CBA did not have it. However, it did have this report and had sent a redacted copy.

The redactions came despite the company backdating an update of its medical policies. ­CommInsure had earlier failed to update its medical definitions in line with medical opinion for a decade. When FOS eventually ruled in favour of the customer, CBA rebuked the ombudsman and said it did not have the jurisdiction to make such a finding.

Ms Troup admitted the company should have accepted FOS’s determination and conceded the company broke section 7.2 of the FOS terms of reference, which requires companies to give the ombudsman full information.

FOS referred the matter to the Australian Securities & Investments Commission, which found CBA’s “serious misconduct” was likely to have misled the ombudsman but took no action other than a warning.

Ms Troup told the hearing CommInsure was worried a legal finding that it was applying the wrong medical definitions could have led it to paying out more previously denied claims. “How did it affect CBA’s relationship with FOS?” Ms Orr asked.

“The first word that comes to mind is trust. The way we behaved would have been very … adversarial,” Ms Troup said.

Former chief medical officer Dr Koh told The Australian yesterday he had mixed feelings but felt “vindicated” that the bank’s “spin (was) exposed for what it is” and questioned whether the prudential regulator was asleep at wheel.

CommInsure faced a series of scandalous reports in early 2016, which centred on its tendency to deny claims on the basis of outdated medical definitions. Before the reports, CBA had not updated its definition of heart attack since 2005, but after the news broke it backdated the definition to mid-2014. This was despite CBA’s former head of life product and strategy Dr Sally Phillips recommending a change to 2012 and CommInsure’s chief medical officer William Monday pushing for a backdating to the “universal” 2007 definition amid concerns the threshold was too high.

ASIC deputy chair Peter Kell also raised concerns with the company that there was no basis for its initial 2014 backdate. Board minutes shown at the hearing revealed originally CBA chose the 2014 date as it fell in “the middle of the range of dates” its competitors had chosen. But it then yielded to ASIC’s requests for a 2012 date after it worked out it would only cost $2.5 million — lower than the original $15m estimated cost.

“Do you accept that it was a commercial decision that had adverse consequences for CommInsure customers?” Ms Orr asked. “Yes I do,” Ms Troup said.

Although ASIC investigated CommInsure for its improper claims handling, the regulator found no contraventions of the law.