This is a sector that has been allowed to sell dud life insurance policies that contain outdated medical definitions that the companies won’t have to pay out. They can do this – and they do – because it doesn’t breach the law.
When CBA got pinged for misleading and deceptive conduct on its advertising, instead of getting fined a total of $8 million, the Australian Securities and Investments Commission (ASIC) asked would it mind paying $300,000 to a community benefit program.
It was only today that Troup admitted that a series of ads being used to flog life insurance policies that included outdated heart attack definitions were deceptive and misleading.
“Sitting here now, looking at the way it was positioned, I can see how ASICâ€™s concerns were legitimate,â€ť Troup said.
It seems appearing contrite on the day of reckoning is the latest technique being employed by executives, hoping to duck the blade.
But it was less than a year ago that CBA was resisting the corporate regulator’s attempt to make it publicly acknowledge it had made misleading statements in four advertisements for life insurance products.
Emails presented at the commission show ASIC caved and the proposed admissions were stripped from the press release about the regulator’s findings on CommInsure’s advertising.
For ASIC it speaks to regulatory capture. For CommInsure it speaks to bad practice and bad faith; something that is rampant in this sector.
The royal commission heard that CommInsure is not alone. It asked 10 life insurers, including AMP, ANZâ€™s OnePath, CommInsure, Zurich, AIA, TAL and Suncorp about their processes for reviewing and updating medical definitions. The response was shameful.
TAL told the commission it didnâ€™t have a formal processes in place to review annually the currency of its medical definitions until 2016.
That wasÂ when Fairfax Media and Four Corners exposed rampant misconduct in CommInsure thanks to whistleblower Ben Koh, the insurer’s chief medical officer, who, as well as raising concerns of outdated definitions, alleged files were going missing and that medical opinions were selected to deny claims. He was sacked after raising these concerns with the bank’s senior management.
Zurich and MetLife said until 2016 they didnâ€™t have a formal process in place to review definitions. Indeed MetLife said in 2016 it reviewed and changed 21 definitions. How many claims were knocked back under those old definitions? Who knows.
It would take National Australia Bank’s MLC until 2017 to document the process for reviewing definitions. MLC admitted that it didnâ€™t have a register to track definition reviews, any requirements to review definitions on a regular basis, any regular formal review of medical literature or a system for monitoring triggers for a potential medical definition change.
AMP didnâ€™t have a formal and regular review of medical definitions until last year and Suncorp said it doesnâ€™t have a framework in place and relies on informal processes and â€śad hocâ€ť medical definition updates.
It told the commission it intended to conduct medical definition reviews every three years.
But the show stopper surely has to go to CBA, which told the commission in a statement it didnâ€™t have any deficiencies in its processes and procedures for updating medical definitions.
The bankâ€™s only acknowledgement, counsel assisting Rowena Orr QC, told the commission, was its failure to update its heart attack definition which was a commercial misjudgment.
This delusional and arrogant assessment speaks to a bank which hasn’t yet got to the first step of recovery, admitting it has a problem. A systemic, cultural problem.
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