The Australian Securities and Investments Commission (ASIC) has commenced proceedings in the Federal Court against OnePath Life for allegedly failing to act with utmost good faith during claims handling.
This was the first time ASIC had sought financial penalties for a breach of this duty following the introduction of new civil penalties in 2019.
These introduced new penalty provisions to enable ASIC to pursue harsher civil penalties and criminal sanctions under ASIC-administered legislation, including the Insurances Contract Act.
ASIC’s case involved a customer with a OnePath Life income protection policy that was obtained in 2016 with advice and assistance from an ANZ financial adviser. At that time, OnePath Life was owned by ANZ. In applying for the policy, the customer disclosed prior mental health-related issues.
In 2018, the customer made a claim on the policy following a shoulder injury. OnePath Life subsequently investigated the customer’s prior medical history, which revealed more specific information about a hospitalisation for mental health issues many years prior to her applying for the policy.
Ultimately, OnePath Life decided not to pay out the policy on the basis that the customer has acted fraudulently by failing to disclose the hospitalisation. ASIC alleges that, in doing this, OnePath Life failed to act with utmost good faith in the handling of the customer’s claim by:
- Failing to make clear to the customer it was concerned that the lack of disclosure was fraudulent;
- Failing to fully investigate the customer’s explanation for the non-disclosure, including failing to speak to the ANZ adviser about the completion of the application for the insurance; and
- Failing, when it avoided the policy and denied the shoulder injury claim, to inform the customer of the right to appeal the decision through OnePath Life’s internal dispute resolution process or by filing a complaint with the Australian Financial Complaints Authority.
ASIC deputy chair, Sarah Court, said: “Insurers play an important role in providing financial security to consumers, particularly in times of crisis. Consumers need to be confident that their insurer will act in good faith and provide procedural fairness when handling their claims. Now more than ever, Australian insurers need to focus on their claims handling procedures and ensure they are meeting their legal obligations.’
ASIC was seeking declarations of contraventions, pecuniary penalty orders, and ancillary orders. The case has been scheduled for a case management hearing on a date yet to be set.
In response, Zurich, which acquired OnePath Life in 2019, said: “Zurich acknowledges the proceedings commenced by the Australian Securities and Investments Commission (ASIC) in relation to the handling of an income protection claim lodged with OnePath Life Limited in 2018.
“Zurich is considering the matters raised by ASIC in its concise statement and is committed to working constructively through the Court process.”
In July 2021, ASIC secured $35 million in remediation for OnePath Life customers after OnePath Life’s poor telephone sales practices caused extensive consumer harm.
Sadly, the responsibility and options were on OnePath to either ask for more medical information at the time of underwriting, put a Mental Health Exclusion on prior to acceptance or believe that sufficient time had lapsed without any further medical advice from when the client had suffered from previous Mental issues, was a problem for acceptance.
Unfortunately, this kind of behaviour by OnePath is not what this company has been noted for in the past.
I think in recent times, well before the pandemic, staff changes (managerial & others), a lack of staff training in key areas, and a lack of service have been to the detriment of a company who used to rely on a reputation that reflected anything but.