Total and permanent disability insurance and the claims handling processes of insurers are well within ASIC's sights.
Following the release of an ASIC review into TPD which found significant, industry wide problems with product design and claims handling the regulator has reaffirmed its focus on the issue.
On ASIC's latest podcast senior executive leader of ASIC's Insurers team, Emma Curtis, explained that since 90% of people with TPD hold their policy through their super fund the issue has brought together ASIC's insurance and super teams.
Curtis named and shamed two insurers who performed particularly badly in ASIC's review.
"We found concerningly high decline rates for two insurers: Asteron, which used to be known as Suncorp, and Westpac. These two insurers declined one in three claims," she said.
ASIC's report found that most of the issues with TPD come down to overly restrictive definitions.
"We're concerned about unfair and restricted definitions in TPD insurance. This typically affects less secure, part-time and casually employed people the most, they end up with second-rate coverage," Curtis said.
"These definitions affect three claims a day and mean that these people are effectively paying for junk insurance."
She said that the premiums charged on this junk insurance are needlessly eroding the super balances of Australians.
Curtis said ASIC found a withdrawn claim rate of 12% and points to the restrictive definitions as the possible cause of that high withdrawn claim rate.
"Insurers had really poor data about the consumers claim experience and the product value, this makes it hard for them to identify problems," she explained.
ASIC senior executive leader of the Superannuation team Jane Eccleston added that trustees, not just insurers, will be expected to act in response to the report.
"The report shows insurance in super is complex. Trustees and insurers both have a role to play to make sure insurance works appropriately for consumers," Eccleston said.
"We expect trustees and insurers to work together on the design of TPD products. We don't want to see junk insurance as part of the design in group insurance policies."
She added that super funds should understand their members are unlikely to have ever navigated a TPD claims process before when making a claim.
Curtis confirmed that ASIC wants to see insurers invest in data to better understand consumer needs and remove the restrictive definitions within some TPD policies.
She added that the insurers named in the report, particularly Asteron and Westpac, will have to update their claims handling processes.
New product design and distribution laws for life insurers will take effect in April 2021.
"The government is proposing to strengthen ASIC's power in regards to claims handling," Curtis said.
"We will be looking closely at claims processes as we get these new powers."