Royal Commission Finds Insurers Open to Multiple Breaches

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The Banking Royal Commission has concluded its hearings into the life insurance sector after being told the three life insurers who provided testimony were likely to have breached the Corporations Act multiple times.

Counsel Assisting, Rowena Orr, QC

At the start of the hearings, the Commission was presented with a sample list of possible misconduct by insurers (see: Commission Details Potential Life Insurer Misconduct) before moving onto case studies related to three insurers who provide retail advised product: ClearView, CommInsure and TAL.

During the testimony provided by representatives of the three insurers, the Commission heard the actions of insurers could be considered as misconduct under law or ‘falling below community standards and expectations’ (see: Insurer Conduct In Commission Crosshairs).

As in previous rounds of hearings, Counsel Assisting the Commission, Rowena Orr QC also presented a range of open findings to the Commission in relation to the case studies presented and the testimony provided by witnesses called by the Commission, detailing possible breaches of the Act, or failures to meet community standards.

ClearView

The Commission was told by Orr that on the evidence, it was open to find that ClearView:

  • Breached the anti-hawking provisions of the Corporations Act more than 300,000 times
  • Breached the prohibition on unconscionable conduct by pressuring individuals to purchase policies
  • Breached the prohibition on misleading or deceptive by misrepresenting matters such as whether customers were committing to purchase an insurance policy
  • Contravened obligations to do all things necessary to ensure that the financial services were provided efficiently, honestly and fairly
  • Failed to ensure that its representatives were adequately trained to provide the financial services covered by its financial services licence
  • Failed to take reasonable steps to ensure that its representatives complied with the financial services laws
  • Failed to have in place adequate arrangements for the management of the conflict of interest
  • May have engaged in conduct that fell below community standards and expectations
    • by failing to take speedy and effective action to address substantial compliance issues when they became apparent
    • by failing to take meaningful steps to address defects in its quality assurance processes after becoming aware that they were ineffective

CommInsure

The Commission was told by Orr that on the evidence, it was open to find that CommInsure:

  • May have breached its statutory obligations under the ASIC Act by engaging in misleading and deceptive conduct in advertising and promotional material for trauma policies
  • May have breached its statutory obligations under the Insurance Contracts Act to act towards the insured with the utmost good faith in relation to a breast cancer claim
  • May have engaged in conduct that fell below community standards and expectations
    • by failing to update its heart attack definition in its trauma policies in 2012
    • by failing to update its heart attack definition in its trauma policies in 2014
    • by deciding to backdate the updated heart attack definition to May 2014 instead of October 2012
    • by failing to respond to FOS within a required period or request an extension in regards to a dispute related to a breast cancer claim

TAL

The Commission was told by Orr that on the evidence, it was open to find that TAL may have engaged in conduct that fell below community standards and expectations:

  • By failing to ensure that it had adequate systems to train its case managers and to oversee the actions of its case managers
  • By failing to have in place robust systems to avoid potential conflicts of interest
  • By failing to have adequate systems in place to ensure its internal dispute resolution team analysed declined claims in a way that was independent of the claims team
  • By failing to accord procedural fairness to policyholders prior to avoiding their policies
  • By failing to have adequate systems in place to avoid serious administrative errors, such as erroneous notifications of policy cancellation for non-payment of premiums

The Commission was also told the possible cause of the above was the result of:

  • Minimal training and oversight of TAL case managers, including no structured training programs in relation to TAL’s claims handling processes
  • The internal culture of TAL at the time that the claims were made
  • A systemic lack of independence in TALs decision-making processes