Round six of the Royal Commission exposed systemic issues across the life insurance value chain and its fledgling code of practice that's yet been powerless to stop unethical behaviour. But industry experts say all hope is not lost.
Counsels assisting Rowena Orr and Mark Costello said TAL and Rest are among the organisations that may have engaged in misconduct that fell below community standards.
AMP may face criminal charges for deducting premiums from deceased members' accounts. CommInsure may have breached statutory obligations for advertising heart attack cover that was misleading and deceptive.
Orr said it's open to the Commission to find ClearView engaged in misconduct by breaching anti-hawking provisions, while Freedom Insurance may have engaged in unconscionable conduct for selling policies to vulnerable customers and a man with Down Syndrome.
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Berrill & Watson Lawyers principal John Berrill says "it's important not to overreact" to the problems highlighted at the Commission.
Berrill, who has worked with people with disabilities for 25 years, sees the benefit of life insurance during times of need.
"I've seen how it can be a life changer and a lifesaver for people. It can help many people avoid the poverty trap and become welfare dependent. It's an incredibly important product," he says.
In one case he worked on, the insurer insisted the claimant, who had a brain injury and trouble talking, could go back to work. The insurer sent the claimant to rehabilitation and they were advised to become a call centre operator.
While stories from his professional experience and some from the Commission sound "horrible," Berrill says they are not the norm.
There'll always be extreme examples or outliers of bad behaviour, he says.
"It's more of a question if it indicates a wider problem and what are the solutions to the problems?"
Berrill hopes the Commission will provide a solution to the definition problem.
"We need the underpinning of standard cover which is a recognition that people don't look at the terms and conditions," he says.
The Insurance Contract Act sets out a good policy on the design feature of standard cover for general insurance but excludes life insurance.
"We need standard cover to extend to life insurance," Berrill adds.
Australian and New Zealand Institute of Insurance and Finance (ANZIIF) chief executive Prue Willsford commends the steps the industry has taken to establish the Life Insurance Code of Practice.
Willsford, who previously worked with the FSC and industry stakeholders to introduce fee disclosure in prospectuses, understands the challenges of launching unprecedented initiatives and changes.
What's pleasing to see, she says, is the industry knows it needs to increase its standards and is prepared to collaborate in the interest of consumers by working on the next iteration of the code.
This is an abstract of a story first published in the latest print issue of Financial Standard. You can view the full article on our free iPad app.