CommInsure stuck to outdated definition despite risk to customers
CommInsure was aware that its definition of “heart attack” for insurance claims was outdated and could potentially result in legal issues as early as in 2012 but continued to enforce its interpretation of the trauma despite that resulting in the rejection of otherwise legitimate claims.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry heard on Wednesday afternoon that Colonial Mutual Life Assurance (CMLA) heard and ignored repeated recommendations that it update its heart attack definition from 2012 to 2015.
While questioning CommInsure managing director, Helen Troup, Senior Counsel assisting the Commission, Rowena Orr QC, introduced evidence proving that CommInsure’s then-chief medical officer made the insurer aware of the risk of not changing its definition to both customers and the firm May 2014.
“Our current definition should be reviewed in order that it is aligned to clinical advancements and practical concerns of medical assessment of claims,” Dr Benjamin Koh wrote.
Otherwise the company risked “unnecessary time wasted, financial and opportunity cost, legal implications and tarnishing of brand reputation when trying to decline legitimate claims that reasonably would have mean admitted within the spirit of the policy”.
This followed the issue being raised by two other doctors in 2012.
The issue again came up in 2015, when the Life Claims Customer Review Project, an initiative organised by non-executive members of CMLA’s board risk committee to get an industry expert to provide clarity on areas of concern, again recommended a definition update.
“Some trauma definitions are either outdated due to medical developments or confusing for customers,” the expert wrote in the key findings delivered in September that year, specifying heart attack as one such definition.
The first recommendation made in the resulting report was to update the problematic trauma definitions.
As Orr put to Troup, however, CommInsure had still not implemented a change by late 2016. The barrister indicated that questioning on this issue would continue when the hearing resumed on Thursday morning.
Throughout the hearing evidence was given on the problems encountered in claiming payouts after a heart attack from CommInsure, in one of two case studies which Orr said would illustrate issues with resolving compensation claims in the industry.
AUTHOR
Hannah Wootton
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
