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Commission Details Potential Life Insurer Misconduct

Major insurers offering products into the retail advised life insurance market have presented a lengthy list of possible misconduct to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Commissioner, Kenneth Hayne, AC QC

The list of actions was presented to the Commission by Counsel Assisting, Rowena Orr, QC as part of her opening remarks for the latest round of hearings, which will examine aspects of the life insurance sector, but will exclude life insurance related financial advice (see: Royal Commission Will Not Examine Life Insurance Advice).

Orr said the list of potential misconduct, and conduct falling below community standards and expectations, had been provided by the life insurers in response to letters from the Commissioner, Kenneth Hayne, AC QC asking them to disclose any such conduct since 1 January 2008.

While presenting the list, Orr stated the activities presented were only selected examples provided by the insurers, some of which had made multiple submissions to the Commission detailing past conduct.

Orr also noted that each insurer acknowledged that it had engaged in possible misconduct or conduct falling below community standards but provided no further comments regarding the behaviour, which is detailed below.

AIA Australia:

  • Failed to notify up to 1000 customers since 2014 that their cover had been cancelled because of non-payment of premiums
  • Overcharged premium payments, in 2009 and 2016, which were deducted twice from customer credit cards as a result of system errors
  • Incorrectly calculated the pre-disablement income of policyholders making a claim, affecting 305 claims between 2012 and 2017, with total underpayment of $3.9 million

AMP Life:

  • Authorised representatives rewrote insurance policies with AMP to collect the maximum upfront commission payable between early 2010 and mid 2014
  • Delays in claims handling were below community expectations and are the source of most complaints received

ClearView

  • Mis-selling of insurance cover by sales agents, including the provision of false or misleading information in relation to the purchase, and coercion to take out a policy
  • Possible breaches of the anti-hawking requirements for unsolicited sales of the Corporations Act in respect to more than 278,000 sales calls s (see: ClearView Admits to 300,000 Breaches of Anti-Hawking Regulations)

CommInsure

  • Trauma policies contained medical definitions related to heart attack and rheumatoid arthritis that were out of date with prevailing medical practice, and 30 customers received more than $4 million in benefits after they were updated
  • Misleading and deceptive statements made on some CommInsure websites about the extent of cover for trauma in the event of a heart attack, leading to a $300,000 ASIC penalty

MLC

  • Correct policy terms or exclusions were not properly applied or interpreted in 26 instances, claims management processes were not efficient, honest and fair in 55 instances, failure to assess claims within the time period specified under ASIC regulations in seven instances
  • 245 legal proceedings brought against the insurer, half of which related to TPD claims
  • Incorrect death and TPD tests applied to certain members of some superannuation accounts between mid-2013 and late 2015 leading to claims being rejected, declined, receiving lower payments, or considered not eligible for cover

OnePath

  • Delayed processing and allocating to 13,629 people of $13.7 million of proceeds of a class action of which OnePath Life was a member between 2008 and 2013

TAL Life

  • Misleading television and online advertisements leading to two infringement notices from ASIC totalling $40,000
  • More than 10,000 instances of sales calls that did not meet the unsolicited call requirements of the Corporations Act and a further 17,000 leads that may have breached anti-hawking provisions for failing to obtain appropriate customer consent, identified in December 2010 and July 2011, respectively
  • From 2012 to 2017, approximately 3.5 per cent of monitored calls were misleading sales calls according to internal criteria
  • Overcharging or underpaying policyholders between 2004 and 2009, and again in 2012, 2014, and 2016 as well as underpaying and overpaying income protection claims on some legacy policies since 2006

Westpac

  • Incorrectly applied premium loadings to 216 customers with 273 life insurance policies during period from 2006 to 2015, leading to total refunds of $611,000

Zurich Australia

  • Errors in communications with customers, including renewal statements, claims resolution letters, and product disclosure statements
  • Failed to manage life insurance complaints on 14 occasions in 2016 and 2017 by failing to notify of claims decisions and to respond to complaints within prescribed timeframes

  • Jeremy Wright

    Finally an admission from the Life Companies that they have made mistakes / errors.

    It has taken a Royal commission with some bad publicity and we start to get the truth, though sadly for retail advisers, we have already paid the price for gross misconduct and elusive behaviour from the Life Companies and the FSC.

    A miracle may occur in the future and maybe some of these insane regulations that will decimate the Life Insurance Industry, may be removed, though the Industry will probably wait until the S–T hits the fan and only then make Reactive changes, which for many advisers, will be too late.