Westpac revealed as rogue after rejected 37 per cent of insurance claims

Westpac was the life insurer that rejected a sky-high 37 per cent of total and permanent disability claims.

Westpac has emerged as the life insurer that rejected a sky-high 37 per cent of total and permanent disability claims, putting the big bank in the line of fire from the corporate regulator as it tightens the screws on the scandal-­plagued sector.

The bank yesterday pledged to review all the claims it rejected last year after The Weekend Australian forced it to admit it was the insurer behind the 37 per cent rate, which was singled out in a scathing report into the industry released this week by the Australian Securities & Investments Commission. However, the report did not name the company responsible and ASIC has refused to identify the insurer.

Financial Services Minister Kelly O’Dwyer had ordered ASIC’s review earlier this year following a series of media reports alleging misconduct and poor claims handling procedures within the Commonwealth Bank’s life arm, Comm­Insure.

Fronting a parliamentary committee yesterday, ASIC chairman Greg Medcraft yesterday said there was more work to do in improving standards among life insurers.

ASIC wants to put in place a fully transparent regime on claims handling, both at an industry and individual company level.

In the meantime, however, he declined to reveal to the House of Representatives Economics Com­mittee the companies with the highest rejected claims rates.

After being pressed on the issue, the ASIC boss said he would disclose the names in private to committee members in coming days.

“I believe if we went into camera we could reveal those names to you. But clearly the parliament is entitled to have them information in camera,” Mr Medcraft told the hearing in Canberra.

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been at the centre of the storm engulfing the industry, after CommInsure was accused of avoiding paying claims by using outdated medical definitions.

Brad Cooper, the chief executive of the Westpac subsidiary that runs the bank’s wealth management business, BT Financial Group, said the figures in the ASIC report needed to be treated with caution.

“ASIC said at its recent appearance at the House of Representatives Economics Committee that the data that has been provided by industry participants is not consistent,” he told The Weekend Australian. “Any comparisons would be misleading and would not provide accurate information to consumers, particularly when they are comparing policies.”

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

In its most recent annual report, the bank boasted its life insurance loss ratio of 33 per cent was “low relative to industry standards given the Group’s relationship focus and claims-manage­ment process”.

Mr Cooper said BT rejected 58 claims for TPD during 2015.

“We strongly support the need for standardised reporting to allow consumers to make meaningful comparisons,” he said.

“However, we are committed to ensuring that all our products meet the highest standards and we will have a further look at each of the 58 declined claims to ensure that our processes are robust and fair.”

Westpac is taking comfort from a review of its claims practices by EY, completed in August, that it said endorsed its practices.

It is believed the EY review reassessed some of the TPD claims rejected by Westpac in 2015 and did not find any problems.

ASIC kept the names of the insurers with the highest claims rejection rate secret even though deputy chairman Peter Kell admitted on Wednesday that the companies had not asked for confidentiality. In its review, ASIC noted there were other insurers who rejected 25 per cent and 24 per cent of TPD claims.

In the past five years there has been a significant increase in claims for TPD, or total and permanent disability, through superannuation funds.

Because of an increased awareness of benefits and the fact there is no time limit on claims, actuarial or pricing assessments have become more difficult.

One insurance executive, whose rejected claims rate was relatively low, said a 37 per cent rejection rate “sounds almost unbelievable. I can’t believe you can have four out of 10 claims declined.”

He said high rejection rates at some companies could be caused by pushing direct life policies through rushed telephone sales, where a customer did not have the chance to declare all the pre-existing conditions they should disclose, leading to rejected policies.

“It’s not all the insurers’ fault, to be fair; the customers need to find the time to go through the appropriate process to get the appropriate cover,” he said. “But the reality is, if you have pre-existing condition-type policy wordings you’re going to end up with high declared declinature rates and that’s not a good outcome for the customer and, to be honest, I don’t think it’s a good outcome for the insurer.”

Yesterday, The Weekend Australian contacted all 15 life insurers surveyed by ASIC for its report.

AIA Insurance, ANZ’s OnePath, Hannover Life Re, Bank of Queensland division St Andrew’s, Suncorp, TAL and Zurich denied they were the insurer singled out by ASIC as having a 37 per cent TPD rejection rate.

Another seven — Allianz, ANZ, AMP, Clearview Life Assurance, the CBA’s CommInsure, Macquarie Life and Metlife — declined to comment but were ruled out by industry sources.

That left Westpac Life Insurance as the only company that could have reported the bumper rejection rate to ASIC, forcing the company to address the issue in a statement issued last night.

Hannover national claims manager John Kalfas said: “I can confirm that Hannover Life Re of Australasia Ltd is not the insurer mentioned.”

A spokesman for TAL, which provides life insurance through super funds, said: “Based on the data supplied to ASIC, TAL is confident that it is not the insurer these TPD decline rates pertain to.” An ANZ spokesman said it was “definitely not us” while a Suncorp spokesman said: “It’s not us, so I don’t know who it is.”

A spokesman for Zurich, which concentrates on selling insurance through financial advisers, also denied the company was among the three high-rejection insurers targeted by ASIC.

“Our overall rate was not only below the market average but it was the retail advised average as well,” he said.

An Air Insurance spokeswoman said the company’s “initial calculations indicate that our average decline rates are well below the outliers referred to by ASIC”.

A Bank of Queensland spokeswoman said it wasn’t St Andrew’s.