ASIC’s Kell takes aim at CommInsure’s ‘outdated’ life policies

ASIC deputy chairman Peter Kell has hit out at exemptions for life insurers from consumer protection regulations.

ASIC deputy chairman Peter Kell. Picture: AAP.

The Australian Securities & Investments Commission deputy chairman Peter Kell has hit out at exemptions for life insurers from consumer protection regulations, after current weak laws hamstrung the corporate watchdog’s investigation into Commonwealth Bank’s Comm­Insure division.

ASIC’s review of CommInsure, which yesterday cleared the company of allegations it pressured doctors to deny claims, failed to interview any customers as part of its investigation. That was despite Mr Kell noting some had “highly distressing experiences” after the insurer denied claims by using out-of-date medical definitions. CommInsure has since backdated its heart attack definitions to 2014.

Claims-handling practices are currently exempt from financial services conduct laws which require efficiency, honesty and fairness in company dealings — an exemption ASIC is pushing hard to overturn.

Despite the short six-page report giving an overall clean bill of health to the business, ASIC criticised CommInsure for using “out of date” medical definitions in its trauma policies, which, while “not against the law” had not “kept up” with medical opinion and were “out of step with community expectations”.

The regulator noted there was no legal basis for it to take enforcement action in relation to the concern.

“The claims-handling part of life insurance is either exempted or treated very lightly under the law and we don’t think that is justified going forward,” Mr Kell said.

“If the exemptions were removed it would allow us to look at aspects of claims handling where we don’t currently have a straightforward legal remedy,” he said.

CommInsure was engulfed by critical media reports in March last year, after a sacked whistleblower alleged the company was pressuring doctors to deny claims. The media scandal prompted a sector-wide ASIC review of the $44 billion industry and a separate parliamentary inquiry, which is due shortly to hand down recommendations.

ASIC cleared CommInsure over claims medical records were deleted, but the life insurer remains under investigation for “potentially misleading or deceptive information” in its advertising. ASIC will also be scrutinising the sector over coming months for its high claims rejection rate for direct policies sold through television and comparison sites, and will be carrying out a separate investigation of company surveillance.

While the law allows insurers to use old medical definitions as long as it clearly discloses those definitions in the policy, the industry is pushing for reforms that allow the setting of standard definitions, which competition law currently prevents.

Financial Services Minister Kelly O’Dwyer’s office confirmed the six-page report was the same document the regulator sent to the minister and there was not a separate, lengthier confidential report.

After reviewing over 60,000 documents and emails and interviewing staff, consumer representatives, medical and legal advisers, ASIC said it “found no evidence” CommInsure claims managers applied “undue pressure” on doctors to change or alter their medical opinions.

Still, ASIC said CommInsure needed to make improvements to its claims-handling processes and the insurer has agreed to a further review in mid-2018.

ASIC said its investigation did not examine the treatment of former chief medical officer Dr Benjamin Koh, who CBA dismissed for sending 260 documents to his personal email account in breach of bank policy. Dr Koh said his decision was taken out of fear the files would be lost.

The ASIC findings follow the release of CBA’s independent review earlier this month, carried out by Deloitte, which cleared it of any systemic wrongdoing. The review led to new payouts of $1,370,000 to customers.

CLSA analyst Jan van der Schalk said CommInsure’s clean bill of health was “no surprise” given the limited scope of the ASIC review. “The real metric would have been if CommInsure disclosed its policy loss and churn figures since the scandal broke. Customers would be voting with their feet,” he said.