A new ASIC report on the steps nine life insurers have taken to address the consumer harms identified in its 2019 Report Holes in the safety net: A review of TPD insurance claims has found that more needs to be done, particularly around the ability of insurers and trustees to use data to improve both product design and claims handling.
A statement from the commission explains that around nine million Australians hold TPD insurance and that most (some 86 percent) do so through their superannuation fund.
ASIC’s new report (REP 696) focuses on steps taken by insurers in response to the 2019 report and covers around 75 percent of the Australian TPD insurance market. It says this group covers all the nine major insurers offering TPD cover, including the seven reviewed in the 2019 report. (See: FSC Fires Back at ASIC’s TPD Insurance Criticisms).
The commission says the new report provides an update on insurers’ progress and outlines the key changes they have made and are planning to make to address consumer harm.
It says the key changes primarily relate to the use of restrictive TPD definitions and onerous claims handling practices. While some insurers are more advanced than others, ASIC’s review found that all nine insurers:
- Have started reviewing restrictive TPD definitions (such as the ‘activities of daily living’ disability test)
- Are working with trustees for insurance in superannuation – some have made changes to policy wording
- Have improved some claims handling practices (such as reducing the length of claim forms and tightening controls around requests for information), which should lower hurdles for claimants
Residual gaps and areas for improvement
ASIC says the new report also sets out residual gaps and areas where improvements are still needed, “…particularly in the ability of insurers and trustees to use data to improve both product design and claims handling”.
ASIC Deputy Chair Karen Chester says that the commission’s extensive TPD review in 2019 revealed that TPD product design and claims handling resulted in poor consumer outcomes.
“While all nine insurers are working to repair the TPD safety net in response to our 2019 findings, our follow up work reveals more needs to be done,” she says, noting that important areas for improvement remain, such as better ways to store and use data.
…data captured by insurers is often inconsistent or not in a searchable or reportable format, limiting its usefulness…
“We found that data captured by insurers is often inconsistent or not in a searchable or reportable format, limiting its usefulness.”
She says that to achieve good customer outcomes, “…insurers must lift their data capabilities. Insurers also need to invest more in their data systems to target claims handling problems, and design products to meet the needs of their target market”.
Chester says that while the latest report focuses on steps insurers have taken in response to ASIC’s earlier work, “…superannuation trustees must also engage with TPD design issues and work on lifting standards, for the benefit of their members”.
She adds that while some trustees have taken positive steps in this direction, others have more work to do.
The ASIC statement explains that in mid-2020 it wrote to nine insurers to understand their actions and plans in response to the expectations set out in the 2019 report.
It says it will provide each insurer with detailed individual feedback, including areas where improvement is required and that it will continue to monitor progress “..and hold insurers accountable to their commitments”.
An FSC spokesperson told Riskinfo the council was pleased to see ASIC recognise the progress the life insurance industry has made over the last 18 months or so “..and acknowledges there is more to be done by life insurers around gathering and using data”.
“At an industry level, the data currently captured in Australia is better than anywhere else in the world, and the industry continues to work hard to improve data collection to deliver better customer outcomes.”
The spokesperson says that overall the latest ASIC report “…is a positive score card, it is a good reflection of industry and regulators working well together to make things better for customers”.
