Legal Firm Alleges Insurers Breached Codes Multiple Times

Life insurers have breached their own code of practice more than 700 times in six months and should face harsher penalties under ASIC enforced codes for failing to do so, a large legal firm has claimed in its submission to the Banking Royal Commission.

Maurice Blackburn Lawyers Principal, Josh Mennen

In its submission, Maurice Blackburn Lawyers also named AIA, CommInsure and TAL as having the highest number of alleged breaches based on cases from its case load, since the FSC’s mandatory Life Insurance Code of Practice (LICP) began on 1 July 2017.

The legal firm claim the alleged breaches relate to life insurers making a decision on a claim within six months from lodgement and providing a response to a complaint within 45 days where a policy is not part of a superannuation fund.

The submission indicated that AIA was subject to 159 alleged claim breaches, followed by CommInsure with 75 alleged breaches and TAL with 64 alleged breaches.

“…from our firm alone we have reported over 700 breaches of this code…and we have outlined the insurers who are the main culprits…”

Maurice Blackburn Principal, Josh Mennen said the LICP was failing to protect consumers and should be examined by the Banking Royal Commission and life insurers were “…all talk when implementing their codes, but the reality is the codes don’t have teeth and are doing little to drive better standards”.

“The life insurance code of practice was only implemented on 1 July 2017, but already from our firm alone we have reported over 700 breaches of this code in that short period and we have outlined the insurers who are the main culprits for these breaches.” Mennen said.

“The industry set itself strict timelines with respect to processing claims and responding to complaints, but as our clients’ experiences show numerous insurers have completely ignored these timeframes despite being signed up to the code,” he added.

Mennen said the life insurance sector was should not be able to ignore non-compliance with the LICP by calling the claim assessment time limits ‘aspirational’ and “…it must be held to account to ensure sick and injured insurance claimants are getting fair and reasonable treatment”.

He said the voluntary insurance in superannuation code of practice would also fail consumers as it was unenforceable, had no independent administrator. and was an extension of the LICP and had ‘inherited’ all of its flaws.

“That’s why we have asked the Royal Commission to recommend that codes of practice be required to have ASIC approval and enforceability, with robust sanctions for failure to comply,” Mennen said.

“We have also asked the Royal Commission to give consideration to ensuring enforceable codes enshrine standard definitions, with clear timeframes for processing claims and setting out remedies and sanctions for code breaches,” he added.

  • Rob

    Conflict of interest by the legal profession! Here we have the no win no fee boys and girls complaining about the insurance industry. Why, well if they can influence the boffins at the Royal Commission, and get change, well then they can reap even more fees from the less fortunate. How conflicted is that.

    • Tony

      Agree Rob. Many of these so called ‘breaches’ will relate to claims decisions not being made within the time-frames in the Code. For represented claims, one of the common reasons for delay in assessments is the involvement of the lawyers in slowing down the information gathering. In many cases, insurers can’t contact medical professionals or claimants directly to obtain evidence – instead having to write to legal representatives and asking them to obtain the evidence. Simply so they can justify their fee. Generally, claims take twice as long to assess where there is legal representation. Oh, and they are less likely to be paid too!

      No conflict there … delaying assessment so the insurer ‘breaches’ so they can seek to demonise the industry.

  • Jeremy Wright

    Once again, the FSC appearing to be doing something and achieving little.

    Even their own masters ignore the weak rules set for them, while encouraging more onerous regulation and oversight on advisers who are the only segment of the Industry that actually provide this service well.

  • Rob

    Perfectly said Tony. It annoys me that no win no fee lawyers are made to portray themselves as champions of the oppressed. The real champion is the insurance company that provides the insured benefit. The lawyers just feed of insurance companies and perpetuate the insurance companies as the bad guy,by having the audacity to attack them. I have never had an insurance company deny a claim. And every claim was paid in an expatiated manner. We need to educate the public better about our role in society. Maybe we should call ourselves, win and little or no fee advisers!

    • Anon

      Quick to make allegations but before providing this information to insurers to investigate these alleged breaches. How is that doing the right thing by clients? Conveniently ignore and have not provided details on claims that are delayed due to circumstances beyond the insurer’s control and complaints where the delay is due to the trustee (their RC submission relates to super and non-super complaints).
      Being opaque and continuing to throw mud at insurers is a good way to keep plaintiff lawyers in the press though and to drive their business model of substantial fees taken from claimants even where a claim would have been successful had they not gotten involved. Need to keep the fees up somehow now the golden tap of Workers Comp claims has been turned off.

  • Old Risky

    I can understand the criticism of the submission coming from the lawyers. And yes the comments about lawyers who get involved early actually slow up claims

    But how many advisers are actually taking the time to submit
    their experiences in poor claims outcomes and attitudes to the RC. At least
    this particular firm of lawyers is doing so and they should be congratulated
    for their efforts, despite our cynicism .

    I’ve taken the time to put a submission to the RC outlining
    three separate attempts over 21 years by one particular insurer to frustrate a
    long-term income protection claimant. On two of those occasions the insurer
    blatantly took advantage of the then $5000 a month FICS/ FOS jurisdictional
    limit on intervention in income protection claim disputes. The insurer took
    that action because they knew that the only recourse this client had was to
    engage in expensive and risky legal action. Ultimately the insurer reversed the
    decisions after months of intervention on my behalf and a one occasion, utilising
    the services of solicitor.

    This same event could occur once again while FOS, backed by
    the insurers, and apparently acting with ASIC’s approval , insists on applying unrealistic upper jurisdictional limits on life insurance disputes, effectively deciding that those with higher insurable benefits can care for themselves. I will bet that ASIC has never consulted a risk specialist adviser on claims management issues, yet goes to insurers asking them to ‘” fess up ‘” on some of their disputed claims history. ASIC in my view continues to exhibit a lack of oversight in their supervision of FOS and other dispute resolution organisations .

    The problem with putting that submission is that the RC is that
    the royal Commissions process of accepting submissions is apparently been designed by an IT genius who expects everybody to lack capacity for quality English expression
    and leaves small spaces on online forms in which to explain a complex submission.

    Finally whether advisers like it or not, a submission from a firm of well-known plaintiff lawyer’s about insurance companies misbehaviour probably carries more punch than one from advisers who been looking after client’s disputed claims for decades. In the end of the day I don’t care, as long as the RC examines the issue thoroughly, puts insurance company executives under the harsh light of a QC, and makes appropriate recommendations in the long-term interest of our clients.

  • Rob

    Another observation. Some smaller industry super funds are opening up to the adviser/advice network. Sunsuper for one. This could be a growing trend. Perhaps this is the real motivation behind the legal professions growing voice. They see us as a threat to their livelihood.