Most major life insurers did not have formal and regular processes to review medical definitions until at least 2016 with four insurers only introducing the processes last year, according to evidence presented to the Banking Royal Commission.
Drawing on information provided to the Commission by 10 major life insurers, Counsel Assisting the Commission, Rowena Orr QC said eight insurers had no medical definition review processes in place prior to 2016, and many also did not have a register of past changes made by the insurer.
The Commission was presented with the information after the conclusion of testimony from CommInsure Managing Director, Helen Troup regarding CommInsure’s use of definitions for heart attack (see: Insurer Conduct In Commission Crosshairs).
“As we’ve heard in relation to CommInsure, the evidence suggests that those expectations have not always been met. And this issue is not unique to CommInsure,” Orr said before presenting the following information submitted by the life insurers.
- AIA Australia: No formal definition review policy or documented processes to review definitions for currency and relevance until 2017
- AMP: No formal and regular reviews of medical definitions until 2017
- CommInsure: Maintained there were no findings its processes for updating medical definitions were deficient, but failure to update its heart attack definition was a commercial misjudgement
- MetLife: No formal reviews of existing products or medical definitions at regular intervals until 2016
- MLC Life: No definition review policy or documentation of the process for reviewing definitions for currency and relevance until 2017, and no register to track reviews of definitions
- OnePath: No formal requirement for reviewing medical definitions prior to June 2017
- Suncorp: No structured framework to proactively review medical definitions to updates but will move to regular reviews every three years
- TAL: No formal processes in place to annually review currency of medical definitions until 2016, and no formal register recording the dates and revisions made to definitions
- Westpac: Did not identify any deficiencies in processes and procedures from 1 January 2013
- Zurich: No formal process in place to review medical definitions for off-sale products until at least 2016
Orr told the Commission that ASIC had taken the view that relying on an outdated medical definition was not a breach of the law, provided the definition was clearly disclosed.
“However, ASIC considers, and we agree, that reliance on outdated definitions is clearly out of step with community expectations. The community expects that medical definitions in life insurance policies will appropriately reflect the community’s understanding of what constitutes a particular medical definition,” Orr said.
The Commission also heard that since July 2017, life insurance members of the FSC, including all those listed above, were required to review the medical definitions in their on-sale policies at least every three years, and update them where necessary, under the Life Insurance Code of Practice.
Orr said AMP, MLC Life, OnePath, Suncorp, TAL and Westpac now reviewed medical definitions in their on-sale policies on an annual basis, and MetLife does so every 18 months. AIA Australia, CommInsure and Zurich indicated they will comply with the three-year requirement imposed by the code.
and advisers were accused of “churn” when they did the research and found their clients were in products without the latest definitions. Where was this piece of useful information when ASIC 413 and all the “adviser destructive” decisions were made by so called experts??
The advisers are required to act in the best interest of their client and so when a recommendation is provided to replace an insurance policy with an alternative that satisfies the clients needs, provides enhanced definitions resulting in a potentially more beneficial claims outcome and is competitively priced or even less costly than the outdated or inferior product, why is that adviser accused of churning business if there is not a consistent or regular pattern occurring and there was no identifiable benefit received by the client ?
Not only that, but many of the insurers had significantly increased premium cost associated with outdated policy definition products and therefore clients will naturally want the adviser to compare equivalent or enhanced quality products in order to reduce cost.
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