CommInsure’s managing director Helen Troup was asked about the bank’s lowballing of a heart attack victim.
Commonwealth Bank’s decision not to update the medical definition for heart attack in line with global standards saved the bank $2.5 million but put it on a collision course with the public, the HayneÂ commission has heard.
It was another dark day for the insurance industry on Wednesday as the commission highlighted a litany of denials and delays of claims by life insurers. Westpac was singled out for taking an average of 184 days to make good on its trauma policies.
The penny pinching antics of Commonwealth Bank were however the main event, and counsel assisting the commission Rowena Orr, QC, took CommInsure’s managing director Helen Troup through events that included the bank lowballingÂ a heart attack victim and misleadingÂ the Financial Ombudsman Service.
The bank was embroiled in a dispute with a policy holder who suffered a heart attack on January 5, 2014 whose claim was denied because he met only the definition for coronary artery angioplasty but not a heart attack. That was because his reading of troponin, which is used to diagnose a heart attack, was 1.9 micrograms per litre, below a reading of 2.0 micrograms per litre required under CommInsure’s policy.
Backdate to 2007
The experiences of the insurance policy holder were similar to those uncovered in a joint ABC/Fairfax investigation that sparked an inquiry by the corporate regulator and attracted widespread condemnation from the public.
The global definition for heart attacks by the world heart federation was updated in 2007, however Commonwealth Bank did not update its definition until 2016, at which time it backdated policies.
But the policies were backdated to only May 2014 against the advice of its chief medical officer William Monday, who said “in the ideal world I would personally move to the universal definition from 2007” and also recommended broadening the definitions to reduce the risk of excluding women.
Actuarial analysis performed by the bank forecast a rise in costs of between $7 million and $22 million following the change however the bank would ultimately only pay another $2.5 million in claims.
The policy holder filed a complaint before escalating the issue to Ombudsman at which point CommInsure attempted to lobby the Ombudsman to have the complaint thrown out on the basis that it was a matter for commercial judgment for the company.
“Is it standard practice to look for ways to challenge FOS’s jurisdiction when a customer looks to FOS?” Ms Orr asked.
“I don’t believe so,” Ms Troup replied.
CommInsure made repeated attempts to have the case thrown out.
It also redacted medical opinion that made findings in favour of the policyholder, misleading the Ombudsman during its negotiations.
It eventually made an ex-gratia payment of $90,000 to the man, on top of an earlier payment of $10,000.
The hearing revealed the Australian Securities and Investments Commission found CommInsure’s withholding of information meant it was likely to mislead the Ombudsman, but it took no further action other than recommending it does not mislead the Ombudsman again and implement the recommendations from its internal audit.
The hearing also revealed from at least 2012, CommInsure knew its definition of heart attack did not reflect the universal definition, but it wasn’t until the very last minute it agreed to backdate its definition to an earlier date of October 2012.
The night before the regulator was due to publish a media release on its CommInsure investigation,Â the CommInsure board tasked Ms Troup and Annabel Spring with backdating the updated definition to an earlier date.
Ms Spring is the former boss of Commonwealth’s wealth management arm who left the business as part of an executive shake-up in 2017.
No financial consequences
Over a late night phone call to ASIC’s senior executive leader Michael Sadaat, Ms Troup informed him of the last-minute change and the regulator sent out a media release the next day noting CommInsure’s decision to voluntarily backdate the updated definition.
Internal emails from Commonwealth Bank staff following the publication of the review a few days later show the insurerÂ was happy with the outcome.
“There were some extremely serious allegations made against CommInsure on the Four Corners program and they were found to be unsubstantiated, and that was a very good outcome,” Ms Troup said.
When asked if she suffered any financial consequences as a result of CommInsure’s behaviour Ms Troup said a portion of her bonus was paid late.
CommInsure’s Ms Troup will return to continue her evidence on Thursday.