BT cleared of ‘systemic’ handling issues on life claims

Westpac’s life insurance arm has been cleared of “systemic” claims handling issues, by an independent review.

BT Financial Group CEO Brad Cooper.

Westpac’s life insurance arm BT Financial Group has been cleared of any “systemic” claims handling issues by an independent examination of its high rate of rejected claims.

However, the BT-commissioned review found the company could have “exercised more discretion” when it knocked back one case with “medical complexity”, a claim which the company had now paid out in full.

The independent review, carried out by EY and a law firm which BT Financial declined to name, found there were no systemic issues with the group’s claims handling. BT was outed by The Australian late last year as the life insurer with the highest rate of rejected claims in the industry — with 37 per cent of all total and permanent disability claims denied — following a scathing report into the sector produced by the corporate watchdog ASIC.

The EY review was not released due to sensitive customer information it contained, but found the insurer’s decisions were “evidence based, transparent and there were no material or systemic issues identified”, according to BT Financial.

The review concentrated on 141 rejected total and permanent disability (TPD) claims over the three-year period that covered the data sent to ASIC as part of the regulator’s review of the sector, which was ordered by Financial Services Minister Kelly O’Dwyer early last year. It came in the wake of a string of media reports alleging misconduct and poor claims handling procedures with the Commonwealth Bank’s CommInsure business.

TPD claims, which provide a payout for people permanently unable to work because they are struck down by illness or accident, have been at the centre of a backlash towards the industry after CommInsure was accused of avoiding payouts by using outdated medical definitions.

Prior to the ASIC inquiry and the independent review, BT had overhauled its claims processes by adding a third level of assessment for any potentially denied claims.

An ASIC spokeswoman said the corporate regulator was “still considering the independent review, which will also inform our follow-up surveillance work”.

The regulator is now targeting individual insurers with high decline and dispute rates for review, and has embarked on “a new major review of life insurance sold directly to consumers without personal advice”, she said.

She said ASIC was also working with the industry to bring in a stronger life insurance code of practice.

According to BT, the review said all of the company’s “declines were appropriate”. However, BT had reversed its position on one rejected claim and paid the claimant “in full with interest” after the EY review suggested the insurer “could have potentially exercised more discretion” in one of the claims due to the “medical complexity and case background.

“Since the claim was declined, and prior to the independent review, BTFG has put in additional steps when reviewing total and permanent disability claims. This now includes all denials having a third layer of internal review before a customer is notified of the outcome,” the company said in a statement.

BT head of insurance Sue Houghton said the review underscored the need for standardised reporting and increased transparency across the industry, to allow customers to make meaningful comparisons between companies.

“We have been open about our claims data, this review and the outcome,” Ms Houghton said. “All insurers need to report claims outcomes using common definitions and data to help restore consumer confidence in an essential financial product for many Australians.”

When BT and 14 other life insurers provided claims data to ASIC the standard definition for what constituted a denied or rejected claim across industry participants was not consistent, making it hard to compare rates across the sector. Westpac has argued, in its submission to the current parliamentary joint committee inquiry into the $44 billion life insurance sector, for the need for standardised reporting across the industry.

Labor MP Terri Butler, who is part of the joint parliamentary committee on financial services, said if there was a high rate of denials that were compliant with policy, then “the firm should consider whether its policies are fair and meet Australian consumers’ expectations”.

“No doubt consumers will also be considering whether they’re getting value for money when purchasing insurance policies where seemingly a lot of claims are denied,” Ms Butler told The Australian.

Westpac’s life insurance arm, which sells both directly to consumers and through super funds, controls about 10 per cent of the Australian market and brought in cash earnings of $162 million in 2015.