An ASIC review of income protection claims has found more work is needed by insurers to ensure that consumers are protected from unfair treatment.
The review of claims from the first half of 2021 covered the following insurers: AIA Australia (including former CommInsure policies), TAL (including former Asteron policies), Zurich Australia (including OnePath Life), MLC, Resolution Life (including former AMP Life policies) and Westpac Life (including BT policies since taken over by TAL on 1 August 2022).
Misuse of Investigative Tools
The Royal Commission and previous reviews had identified concerns around the misuse of investigative tools by insurers. In 2021 ASIC took action against TAL Life for a breach of its duty of utmost good faith in handling a claim. On 1 January 2022 the Corporations Act was changed to introduce a legal obligation for insurers to handle claims efficiently, honestly and fairly.
ASIC has in the past been concerned about consumer harm arising from:
- non-disclosure investigations or “fishing” without reasonable basis
- physical surveillance activities
ASIC reviewed around 4800 individual income protection claims and found that:
- Non-disclosure investigations were conducted in 5% of claims and 40% of these related to mental health. Five insurers were found to have possibly been involved in “fishing”.
- Physical surveillance was conducted in 1% of claims and in 17.5% of these claims this may not have warranted because other investigative methods had not been exhausted.
ASIC Deputy Chair, Ms Karen Chester Statement
While ASIC found that some life insurers had made improvements in their claims practices, ASIC Deputy Chair, Ms Karen Chester, stated that, “Following the review, we remain concerned that some insurers still appear to be “fishing” for non-disclosures to avoid paying out legitimate claims. We are putting insurers on notice that we will take action where we see consumer harm from poor claims handling practices.”
Further, Ms Chester noted, “We also identified concerns around mental health claims and investigations. Non-disclosure investigations and physical surveillance are intrusive measures and insurers must ensure they have reasonable grounds to undertake therm. We expect physical surveillances to be used as a last resort only.”
As a result of the review ASIC has written to the participating life insurers outlining areas for improvement and their expectations in relation the obligation to handle claims efficiently, honestly and fairly.
More information about the claims performance of individual life insurance companies can be found in the 2021 life insurance claims statistics from APRA/ASIC.