Labor urges insurance crackdown ahead of Hayne report

Australian Financial Review Sep 20 2018 10:27 PM

John Kehoe

Labor is pressuring Treasurer Josh Frydenberg to explain why the government has failed to give the corporate regulator power to regulate insurance claims handling, as both sides of politics prepare for the interim royal commission report to be released next Friday.

Shadow financial services spokeswoman Clare O'Neil will attend the commission's hearing in Melbourne on Friday and call on the government to explain why it has delayed giving the Australian Securities and Investments Commission the power to properly regulate claims handling in insurance.

Kenneth Hayne's probe has uncovered allegations of wrongdoing by insurers in unfairly assessing and paying out claims, including Allianz, Suncorp and Youi.

"I cannot begin to described how disgusted I was to hear that one insurance company left a pregnant woman without a roof for over 18 months. Insurers should be handling claims efficiently and fairly – not ripping customers off," Ms O'Neil said.

"The government could've given ASIC the legal powers to punish this kind of bad behaviour ages ago.

"ASIC has called for it, a parliamentary Inquiry has considered it – the government needs to explain why it does not support this reform."

The government has been awaiting the Royal Commission's report before finalising a policy response for the insurance sector.

Mr Frydenberg said it was the Coalition government, not Labor, who said it was important to have insurance in the terms of reference for the Royal Commission.

"We have announced a number of reforms to the insurance industry which will address areas of misconduct identified at the Royal Commission," he said.

"This includes removing the exemption for Insurance Claims Handling the Corporations Act, extending application of Unfair Contract Terms laws, introducing penalties for breaches of the 'utmost good faith' provision and introducing more effective disclosure for general insurance.

"Some of these reforms are in the process of being legislated and some others are waiting for the recommendations from the Royal Commission before implementation."

Unlike other financial services, the Corporations Act has an exemption for insurance claims handling.

Life and general insurance is also exempt from the Unfair Contract Terms laws.

The insurance sector had lobbied against monetary penalties for breaches of the "utmost good faith" provision in the Insurance Contract Act.

ASIC has pushed for tougher laws to hold insurers accountable but the government so far has not implemented changes.