CommInsure faces scrutiny over advertising

The Australian 2:37pm December 18, 2017

Michael Roddan

Commonwealth Bank’s life insurance division CommInsure will have its advertising independently reviewed after the corporate watchdog found it likely misled customers about its heart attack cover.

CommInsure last year was found to be using outdated definitions of heart attack to deny legitimate claims, as part of a slew of allegations against the company.

CBA has cited independent reviews that have cleared the insurer of any “systemic” wrongdoing, despite wideranging accusations of improper claims-handling processes.

CommInsure has paid additional benefits for 32 claims totalling approximately $4 million after it reassessed claims.

CommInsure will also tip $300,000 towards the Insurance Law Service after the Australian Securities & Investments Commission found that misleading and deceptive statements were likely to have been made on some of the insurer’s websites about the extent to which customers would be entitled to cover for trauma if they suffered a heart attack.

The nation’s largest bank recently struck a deal to sell the CommInsure business to Hong Kong-based life insurance specialist AIA Group for $3.8 billion. The takeover is scheduled to settle next year, and AIA is planning to dump the tarnished brand.

CommInsure will face a review by an external firm which will investigate whether the company’s processes and procedures ensure compliance with the law, and to make recommendations to improve compliance if required. The review is expected to be finished by June next year. CommInsure has already faced another two separate independent reviews, plus a wideranging ASIC probe.

CommInsure said ASIC’s concerns related to “a small number” of advertisements “primarily produced for financial advisers”.

“In March 2016, CommInsure updated its heart attack definition back to May 2014 and made further changes by backdating that definition to October 2012 in March this year,” the company said in a statement.

ASIC launched its investigation into CommInsure in April 2016, after several media reports made explosive allegations against the group, aided by whistleblower Dr Benjamin Koh, who is currently engaged in a legal dispute with the company. Part of the review looked at advertising from mid-2013 to March 2016 and found that misleading and deceptive statements are likely to have been made.

An ASIC review of CommInsure in March cleared the company of allegations it pressured doctors to deny claims, but criticised it for using “out of date” medical definitions in its trauma policies which, while “not against the law”, had not “kept up” with medical opinion and were “out of step with community expectations”. The regulator noted there was no legal basis for it to take enforcement action in relation to the concern, as claims-handling practices are currently exempt from financial services conduct laws. The laws require efficiency, honesty and fairness in company dealings — an exemption ASIC is pushing hard to overturn.

CommInsure recently lost a fifth contract to supply insurance for a superannuation fund, with Vision Super, which has around 100,000 members and almost $9 billion in assets, in November switching to MLC Life Insurance. That decision made it the latest large industry fund to end its relationship with CommInsure since allegations of poor claims-handling hit the company in early 2016. HESTA, which looks after the needs of Australia’s health and community services workers, has dropped CommInsure, along with transport and logistics fund TWU Super, education and community worker fund NGS Super and professional services fund CareSuper.