The allegations of failure to pay claims on life insurance policies currently being directed at CommInsure have rocked the life insurance industry this week and may lead to a wider review of life company claims processes, including the possibility of a Royal Commission.
Following the publication of reports by Fairfax media and the ABC Four Corners program in recent days detailing a series of claims denied by CommInsure, including one case involving what has been reported as an out-of-date trauma definition, Assistant Treasurer Kelly O’Dwyer has stated that ASIC will look at these issues and whether they may be systemic across the insurance sector.
Speaking on ABC Radio this week, O’Dwyer stated the allegations around CommInsure were “…deeply concerning and they need to be properly investigated”. However, the Assistant Treasurer stated twice that any investigations would examine whether the issues were confined to CommInsure or were more systemic.
“ASIC has advised the Government they are looking into the cases that have been raised and we have asked ASIC for an urgent report to look at whether the practices that have been raised in the story overnight are more systemic than simply just related to CommInsure,” she said.
“..we have asked ASIC for an urgent report to look at whether the practices that have been raised in the story overnight are more systemic than simply just related to CommInsure.”
When questioned about a Royal Commission into the life insurance sector O’Dwyer was non-committal and instead pointed to the broadening of the terms of the Scrutiny of Financial Advice inquiry being conducted by the Senate to now include the life insurance industry. However, the Federal Opposition has stated its support for a Royal Commission, which it says should take place after the Senate and ASIC have examined the claims levelled against CommInsure.
In a doorstop interview, Shadow Minister for Financial Services and Superannuation, Jim Chalmers, also raised the question of whether the allegations made against CommInsure were more widespread.
“We need to get to the bottom of this. We need the CEO of the Commonwealth Bank to front up to the Senate Inquiry. We need to make sure that ASIC has the resources it needs to properly investigate what is going on here,” Chalmers said.
“Once we know what the Senate and ASIC uncover about these practices, then we are prepared to talk to the Government about a possible Royal Commission.”
“Australians will find it very hard to believe that these are somehow isolated incidents. As we get to the bottom of these issues uncovered this week, we do need to know whether we’re dealing with something which is systemic within CommInsure and perhaps even more broadly than that.”
Allegations concerning CommInsure made by Fairfax Media and the ABC’s Four Corners program:
- Denial of a trauma claim by maintaining what has been stated as an outdated definition of what constitutes a heart attack
- Denial of a terminal illness claim where organ transplant could have been an option (subsequently settled)
- Refusal to pay a terminal illness claim, notwithstanding the prognosis of three specialists (A possible settlement is pending)
- TPD claims denied to two former Commonwealth Bank (CBA) group employees who left the group after being considered too ill to work by CBA (One of these claims has been settled and a possible settlement is pending for the other)
Riskinfo understands CommInsure will be seeking to respond in the near future regarding the allegations contained Fairfax/Four Corners reports.
They are systemic practices that are not confined to Comminsure. Sometimes it depends upon the potential payout as you saw on 4 Corners.
The person who had the heart attack should have been paid $1.1M but so far according to the program, he’s not been paid.
The performance by the CEO was one of rhetoric without substance. A bit like froth and bubbles with nothing underneath. It was shameful and a disgrace.
Another Life company (not Comminsure) held a client to ransom for up to 6 months before paying his claim on the proviso that “he ” cancelled his non cancellable policy. because the prognosis for the client was that the problem could reoccur in the future. The client in this case had diligently paid his premiums for 7 years before needing to make a legitimate claim. We lost that client and have never given them another one since.
The Comminsure Trauma definition for a loss of hearing claim states the ” complete and irrecoverable loss of hearing in both ears”. So if you were to lose 58.0% loss in one ear and 65.0% loss in the other ear and despite the fact that a Workers Comp audiologist states you are deaf, according to Comminsure, you are not.
It was documented that normal hearing aids would not remedy the client’s loss of hearing problem. An experimental Cochlear ear transplant was recommended but this did not help the client, if two people in the same room were having a conversation. He could not discern what they were saying without lip reading.
The issue at hand is that the definition does not say “total and irrecoverable loss of hearing in both ears” which I would interpret to mean a 100.0% loss. It’s not quantified, so according to Comminsure you could lose 95.0% loss in one ear and 98.0% in the other and you are still not deaf.
Why would any client pay premiums for many years and then find out a large insurer weasels their way out of paying claims.
The lack of morality of Life companies has never been more on display than with the LIF changes.
Most, if not all have wacked up their premiums by as much as 20.0% in anticipation of reduced commission payments to advisers under LIF and no corresponding material benefit to clients. The xyZ company has withdrawn their previous top of the line IP contract just to show that their offering is no better than anyone elses.
If the Assistant treasurer had bothered to consult those who work in the industry such as advisers,she would have found that any” malaise” within the industry is mainly caused by the Life companies themselves.
But she’s chosen to nail the sitting duck and easy target,…….the adviser !!
Many questions come from this case.
What does the AMA say about doctors seeming to agree to manipulate or delete their a clients medical report to please an insurer? Why would any doctor do such a thing?
Does the insurer have the right to define their product offering? Heart attack definitions in particular have been tested in court and it seems that they can. Advances in diagnosis that no longer require troponin markers simply mean that we can detect more nuanced and subtle heart damage.. Considering that coverage quality is intrinsically linked to price do we want lower cost policies (which according to research by TAL the community is screaming for) or high quality contracts that cover more but also cost more?
Should the industry move to the highly confusing severity based definition where a payment is made based on the life impact and not on the clinical diagnosis?
What about the mired of other conditions in a trauma policy that have had material changes to their quality over the past few years? Should insurers have paid those that were diagnosed with MS when the definition required (and the policy was priced for) 25% impairment?
Since we had such a “comprehensive review” of Life insurance under LIF why was it that both the regulator and government utterly failed to investigate this area? The focus was purely on remuneration of advisers and churn.. not on the low quality direct products, not on the claims process, not on the banks throwing low cost general advice superannuation products at people without ever considering the insurance they may lose when they move and not on the utterly horrendous compliance requirements in place to simply recommend someone buy a trauma policy..
The treatment of claimants with legacy policies is a completely valid conversation but I do wonder if we will just have another free for all where the loudest “experts” trundle off like Don Quixote to fight the wind-mills of the life insurance industry.
And just because I like plugging Sue’s work… If I was a life company I would have wished I didn’t ignore Sue Laing’s offer to come in and rate my claims process when she started C-MAP.
Thanks for liking plugging our work, Michael. We like you plugging our work, too. You will hear more about C-MAP in the next little while as it is still very much alive and totally effective in measuring the kinds of issues in the spotlight right now. We feel there will be companies who will wish they had a C-MAP rating to hold up and wave right now; there will be others whose known practices they would not have wanted exposed by C-MAP. No way of knowing who is who in those categories though.
There is one proven way to hurt life insurance companies that offer rubbish contracts – don’t place your business with them. The stories this week about CommInsure not paying claims don’t surprise me one bit but I’m not fussed either because in the 8 years I’ve been an adviser, NOT one of my clients has been advised by me to place their cover with them.
What sickens me most about this article is the pathetic knee jerk reaction displayed once again by ASIC, several Opposition ministers and our forever failing Assistant Treasurer, Kelly O’Dwyer. Royal Commission – bah humbug! What a waste of tax payers money.
Standard commercial practice, in any industry, is to vote with your feet. It forces more change than another ridiculous Royal Commission ever will.
Now that CommInsure has shown its true hand, it should be a wake up call to the public and advisers out there recommending them, not to insure with them now. Like the meercat on the ‘comparethemarket.com.au’ tv commercials says….”Simples”!
I’ve always thought it amazing that Life Insurance companies get to decide who is paid and who is not. Surely they are, dare I use the term “conflicted” in so far as they are substantially financially incentivised to knock claims back where they can.
They are also incentivised to design products that have sneaky little clauses in them which they invariably rely upon to knock back payment. I’ve seen this occur many times over the years and it has always come as a great surprise to me and the client’s doctors.
The answer I think would be to have an independent panel, funded by the industry to decide on claims payment and standard product design. So that Trauma policy A is the same as Trauma policy B no get out clauses.
Comminsure have dragged my TPD claims out for two years. They have further destroyed my life at a time I needed them most. I’ve paid them $120k of premiums over 14 years and the treatment from their claims team has been bully like. Shame on you. I will never give up my fight on this and I intend to expose the moral deficiencies of this company. Settlement before court means the claimant has to compromise the amount they get. It’s disgusting given that you brokers run SOAs selling large sums of cover “appropriate to your needs” then get short changed at settlement. They should immediately change the requirement for decision making time for life insurers. Currently there is no statutory time limit to decide a claim! You guys have spent so much time lobbying your commissions and obsessing about Trowbridge, you forgot the customers you represent…..you can do better brokers and Comminsure you disgust me. Disgruntled TPD claimant
Cmon ASIC, grow a set. Put the beast out of our industry.
They have proven continually that they are not a fit and proper organisation to run a financial services business.
Be that product or advice…
This is not isolated to Comminsure. I would welcome a broader inquiry into all providers in this industry (retail, industry and tele marketed) as you will find many more cases such as those provided in the Fairfax/Four Corners report.
Dear Silvi,
I’m sorry that your TPD has dragged on for so long. I don’t know your circumstances but if your circumstances fit the definition of what is a bona fides TPD claim, I can only imagine that the quantum of the payout is as important to the company as it is for you.
As I said in my previous post I fought for just over a year on behalf of my client to try get Cominsure admit his $400,000 Trauma claim. They even stated that they intended to review their definition of ” hearing loss” so the client (in their view) may be eligible in the future to lodge a claim.
As you will see from my previous post I believed he already had a legitimate claim and he and I went to great lengths to try and prove it.
After 12 months using my own financial resources, we could not continue to keep up the fight and I could not expect my client to pay $10,000 p.a and rising each year in the hope that this dishonorable Company may pay him in the future.
I don’t give Comminsure any business because they are only one of a number of Life companies that somewhere it is written in the small print, ” You pays your money and you takes your chances”.
Advisers get no joy out of dealing with companies that behave badly or put up obstacles when it comes to a claim.
I think most advisers try to build their reputations based on the fact that when/if your hand goes up for the money, they will be there for you to deliver the cheque.
And isn’t it for this very reason of outdated policies that “Independent” Financial Advisers review their client’s Risk Management Plans and make recommendations accordingly?? We call it Servicing and it gets labelled Churning. Also, the Independent Financial Adviser would be handling the claim through to satisfactory settlement because they are not an employee of the Insurer, they are on the client’s side.
I’m not fully aware of these cases and haven’t watch the ‘For Cronies’ report, but if I’m an insurer and my policy says I will pay for XYZ event and you unfortunately suffer from XYW, I’m not paying. As advisers it is (or should be) our job to identify this so our clients know what they’re in for, not try and blame the insurance policy for not matching the client’s diagnosis.
There is a real problem with Trauma insurance. With all of the different definitions and clauses attached, despite the Adviser’s best endeavours, the only time that the worth of the product will be determined is at claim time. If an adviser recommends a policy with the best Cancer definition, but the client suffers a claim for a different trauma and the definition is not so good then the claim is denied and nobody wins. Time for standard definitions across the industry.
Yes…again shame on the Product Providers…and yes I also can confirm that denying legitimate claims is NOT unique to CommInsure. There are others and sometimes the “otherZ” comes from unexpected parties and that really is very frustrating. I’ve recently had a case where the claims department has hidden behind a “Full Spine” exclusion when it is obvious and medically proven that the client’s current issue with his lower back is NOT related in any way to his “Pre-Existing” condition. After all…isn’t the “Comfort Letter” designed to give the client (and the Adviser for that matter) the COMFORT in the knowledge that an exclusion will only prevent a claim relating to the manifestation of the “Pre-Existing” condition….apparently NOT SO, according to my most recent knock back. This behavior is bordering on “misleading and deceptive” conduct and ASIC should be made aware of what is going. That said I have had other claims experiences that exceed your expectation and you wonder why all claims can’t give you the same experience and comfort.
Another claim assessor from another company has asked for ridiculous financial information to assess a TPD claim. When asked why they needed this level of information they said because they want proof that the client was working up until the event to has left the client Totally Disabled. The assessor then went on the say that it matters because it may decide which TPD definition they use to assess the claim. I then reviewed the PDS and I couldn’t find any information that supported the assessor’s comments, so I emailed the assessor a copy of the PDS I refer to and asked them to pin-point the information in the relevant PDS that supports their comments. I’ve heard nothing back so I sent the same email again and again nothing…so I’m now about to resend it again for a 3rd time. And they wonder why Adviser’s have a love/hate relationship with Product Providers.
ASIC please step in and clean up their act and stop fixating on Risk Advisers…we are NOT the problem…are you listening???
There appears to have been a considerable amount of almost hysterical response to the Comminsure “Four Corners” programme with much of it suggesting that this sort of thing is widespread, calls for (yet more) enquiries into the Life Insurance industry to name only two such reactions. With more than 30 years’ experience as an advisor and with more than $10 million in claims I have never once had a claim rejected and in the main, I cannot speak more highly of the claims administrators with whom I have dealt. Having said that I admit, none of the claims have been with Comminsure and my question is were the policies in question written by experienced advisors, salaried employees of Comminsure or simply as “add ons” to award superannuation funds? In the Four Corners report, no mention was made of the “advice” given to the clients, by whom and if the advisors (if any) were also involved in the claims. Again, quoting from experience, the management of claims is as much an advisor’s responsibility as that of the insurance company and it begs the question whether the initial outcome of these claims would have been different with a dedicated advisor actively involved>
@Ben,
Do yourself a favour and watch the 4 Corners program,……. you’ll be seriously enlightened unless you work in the claims department of Comminsure.If you do, then I then suspect that you will doubt the credentials, the qualifications and the assertions made by the former CMO of Comminsure, who pointed out the companies attitude to avoid paying claims, even to their own staff.
@Peter Hartnell,
The starting point is not about the lack of adviser involvement nor is it about adviser hysteria.
If you cared to watch and listen to the former CMO of Comminsure condemn what is the acceptable culture in regard to claims , you would have a better understanding of what has been alleged. The sad part is, the CEO of CBA owned Comminsure came on with a lot of rhetoric, no real answers to those who had been wronged and that unfortunately is the pathetic response to a problem shared by some other life companies.
It’s not all of them, but some do operate in what one can only say is an unethical way.
As an adviser that’s been in this business a lot longer than you, I know who some of those companies are.
@Peter Hartnell,
I forgot to add that I’ve got a 50.0% strike rate with Comminsure admitting and paying claims which strange as it may seem coincides with the comments made by their former CMO. That’s over a 25 year period of giving that company any business when I was once considered by them as a preferred adviser.
They should have their licence revoked.
Like everyone else I was disgusted by Comminsure’s behaviour and glad to see that it’s been highlighted.
Is O’Dwyer finally going to wake up to fact that these issues are systemic in the Group and Direct channels and not in the adviser channel which she and the FSC are trying to destroy with the result…wait for it…more business then going to the group and direct channels!!
So where are we at?
We have the FSC of which Comminsure is a member desperately trying to push through the LIF which will cut adviser competition, boost profits and force more customers direct.
We have have individuals with the same self interest as the FSC with the absolute audacity to even try and blame Comminsure’s behaviour on adviser commissions.
We have the FSC dragging its feet on a code of practice which should not be allowed to be written by them in the first instance (more self interest).
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