Saturday, 23 March 2019

CommInsure could face criminal charges over insurance ads

Ms Orr said it was open to the commission to find that CommInsure had breached section 12d(b) of the Australian Securities and Investments Commission (ASIC) Act, which can be a criminal offence.

She said CommInsure had also made civil breaches of the Corporations Act and the ASIC Act, including misleading customers and had made misrepresentations to the Finanical Ombudsman Service including withholding details about a customer’s severe heart attack so he would not be able to claim.

CBA's CommInsure changed its definition of heart attack in 2016 after an investigation by the ABC's Four Corners and Fairfax Media.

CBA’s CommInsure changed its definition of heart attack in 2016 after an investigation by the ABC’s Four Corners and Fairfax Media.

Photo: Wayne Taylor

Ms Orr said CommInsure’s misconduct was driven by a culture that put profits over people.

It emerged in the hearings that CommInsure used old definitions of what constitutes a heart attack and breast cancer.


AMP said it strenuously rejected the assertion that it committed a criminal offence and rejected the other open findings.

Ms Orr said life insurance giant TAL breached its legal obligations in a “systemic” way.

“It is open to find that TAL engaged in misconduct in a number of respects,” Ms Orr said.

Citing two case studies where TAL aggressively sought to avoid paying out mental health claims to customers, Ms Orr said the insurer might have breached an obligation to act in the “utmost good faith” to clients.


The potential breaches outlined by Ms Orr included its use of “bullying tactics” and “highly intrusive” surveillance.

Ms Orr said this amounted to going on “fishing expeditions” and suggested it was a “systemic” breach of its obligations.

Allianz may have committed criminal breaches of the Corporations Act, Ms Orr said, by not removing misleading content from its website, misleading ASIC and trying to “manipulate” the content of an independent report prepared for APRA by professional services firm EY.

Allianz declined to comment on Friday.

Ms Orr recommended that life insurer Clearview face criminal charges for breaching anti-hawking laws between 300,000 and 303,000 times.

Clearview was also recommended to face civil proceedings for unconscionable conduct and for misleading customers through the sale of insurance to cover people who had an accident despite the definition of an accident being very limited.

Ms Orr said Clearview chief actuary Greg Martin had agreed while giving evidence during the past week that the group had “almost endemic compliance issues with Clearview Direct for a number of years”.

Freedom Insurance Group – which shocked Australia when it emerged it had sold a life insurance policy to a man with Down syndrome –was also recommended for civil penalties over its handling its handling of vulnerable consumers. It closed its direct life insurance business during the hearings.

Ms Orr said Freedom chief operating officer Craig Orton had acknowledged the company had “engaged in misconduct and conduct falling below community expectation”.

Freedom had also failed to report breaches to ASIC, she said.

Freedom said in a statement it was “deeply sorry” over the “instances of unacceptable behaviour highlighted by the commission” and had already made significant changes to its business.

“In the week before Mr Orton gave evidence, Freedom filed a breach report with ASIC which related in part to the complaints that Freedom had received in relation to its treatment of vulnerable customers.”

Industry super fund REST may have breached a series of laws setting out its duties as a trustee meant to act in members’ best interests when dealing with a paraplegic REST member, counsel assisting Mark Costello said.

Mr Costello said REST may have engaged in misconduct when it deducted insurance premiums from members when they were no longer covered by insurance.

Mr Costello said REST may had recently reported its breach relating to how it dealt with death benefit payments to ASIC. In doing so, Mr Costello said, it may also have breached corporations laws relating to its financial services licence.

In a statement on Friday, Rest said it was “committed to supporting and cooperating” with the Hayne commission and it had recently simplied its insurance policy terms.

Mr Costello suggested Insurance Australia Group’s Swann breached various sections of the Corporations Act over its sale of motor cover that offered little or no value.

The potential breaches related to obligations to act efficiently, honestly and fairly, properly monitor staff, and deal with conflicts of interest.

IAG did not immediately respond to the closing remarks but said it no longer sells this type of cover.

Customers deceived

The commission also released a series of findings against insurers Suncorp and Youi over claims handling processes for natural disasters.


It was also open to the commission to find that Suncorp’s AAI insurance arm misled and deceived AAMI customers when it said in its advertisements that it would cover any repair, no matter the cost, despite often offering to resolve claims with cash settlements below the cost of repairs that its customers could access.

The commission also recommended that Suncorp’s AAI made several breaches of the General Insurance Code of Practice when dealing with a claim by the Heald family whose house was severely damaged in wild storms in the Hunter Valley in 2015.

Insurer Youi engaged in misconduct in its handling of two natural disaster claims that involved extensive delays in repairing customers’ homes, a closing submission suggested.

The submission also said the handling of these claims – including one where a pregnant woman and her family were forced to temporarily live in a caravan because their house was made uninhabitable – breached the insurance code of conduct and a legal duty to act in the “utmost good faith” towards customers.

The misconduct was probably affected by key performance indicators that encouraged staff to work on new claims, rather than those that were larger and more difficult.

Sarah is a business courts reporter based in Melbourne.

Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.

Ruth Williams investigates corporate governance, crime, financial regulation and whistleblowers.

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