CommInsure admitted it misled the Financial Ombudsman Service that was helping resolve a claimant's dispute by deliberately withholding medical information and delaying the process, the Royal Commission heard yesterday afternoon.
Counsel assisting Rowena Orr turned her focus to CBA's life insurance subsidiaries CommInsure and Colonial Mutual Life Assurance (CMLA), with executive general manager Helen Troup representing the group.
A customer took out a policy with CommInsure that covered heart attacks and coronary artery angioplasty. Subsequently in early 2014, the customer suffered heart problems and had to undergo several operations.
The customer successfully claimed for coronary artery angioplasty, but was denied a claim for a heart attack because CommInsure's medical experts deemed the condition failed to meet the definition.
On 9 March 2016, the customer filed a complaint with FOS.
FOS' investigation found the condition did meet updated definitions of a heart attack and seven months later, ruled in favour of the customer.
CBA rejected the FOS' recommendation based on a technicality - the customer raised the claim with CBA in January 2014 - well before it updated its definitions in May 2014.
During FOS' investigation, Troup admitted CMLA failed to provide information requested by FOS on the basis it didn't believe it was "relevant."
Additionally, CMLA failed to be open and transparent in its dealing with FOS and as a result, did not comply with FOS' terms of reference or ASIC regulatory guide 139, which explains what's expected of parties involved in a dispute resolution process.
Troup explained CMLA was "misguided" at the time, and the way it challenged the ombudsman's jurisdiction was "regrettable."
From FOS' point of view, CMLA's actions amounted to "serious misconduct" for significantly delaying the process, hampering timely resolution. It was prejudiced in the outcome of the dispute, FOS said.
As this particular case was unfolding, Orr pointed out that a joint Four Corners and Fairfax investigation in March 2016 alleged CommInsure knew its trauma insurance contained heart attack definitions that were out of date.
In the same month, CommInsure announced it would update the definitions of heart attack and severe rheumatoid arthritis in its trauma products, and reassess past claims under those definitions going back to 11 May 2014.
Earlier yesterday morning, the Commission reinforced ASIC's recent findings that accidental death insurance was "problematic."
Orr echoed why accidental death policies offered little to no value to consumers and many life insurance providers have ceased selling these products altogether.
Based on statements submitted to the Commission by 10 life insurance providers, Orr highlighted just how profitable accidental death policies are - and the disproportionate rate claims were made and/or rejected.
Over the last five years, CMLA sold 18,928 accidental death policies and received $121 million in premiums. Of the 1829 claims made, 88% were denied in full.
MLC sold 1684 sold accidental death policies via online, over phone or financial planners and received $34.2 million in premiums. About 103 claims were made and 61% denied.
OnePath sold 3200 accidental death policies in return for $57.6 million in premiums. It declined 14% of the 435 claims made over five years.
Suncorp received $3.9 million in premiums for selling 1838 policies - 40% of the 10 claims made were denied.
Westpac Life no longer offers accidental death policies. Of the 2178 policies sold during the period, premiums mounted to $103.6 million; 49% of the 108 claims were denied.