The Australian Securities and Investments Commission (ASIC) has raised more concerns over life insurance claims handling by some insurers.
After a review of nearly 4,800 individual disability income insurance (IDII) claims received between 1 January and 30 June 2021, the regulator concluded more work is needed by insurers to ensure that consumers are protected from unfair practices in non-disclosure investigations and physical surveillances.
ASIC is continuing to look at those life insurers that had a higher proportion of potentially unwarranted investigations identified in the review, although it added that some had already made improvements to their practices as a result of the review.
The regulator has longstanding concerns about the potential consumer harm resulting from over-use of intrusive claims handling practices like non-disclosure investigations and physical surveillances.
Previous reviews include ASIC’s 2019 report 633 Holes in the safety net: a review of TPD insurance claims and 2021 report 696 TPD insurance: Progress made but gaps remain, while the Financial Services Royal Commission examined several case studies of egregious conduct in which physical surveillance and non-disclosure investigations were improperly used.
ASIC deputy chair, Karen Chester, said: “ASIC’s latest review sought to test whether insurers were now entrenching good practices, especially with insurers now being subject to new claims handling obligations. We also sought to identify any outliers and areas for improvement.
“Following the review, we remain concerned that some insurers still appear to be ‘fishing’ for non-disclosures to avoid paying out legitimate claims. We are putting insurers on notice that we will take action where we see consumer harm from poor claims handling practices.
“We also identified concerns around mental health claims and investigations. Non-disclosure investigations and physical surveillance are intrusive measures and insurers must ensure they have reasonable grounds to undertake them. We expect physical surveillances to be used as a last resort only.”
ASIC has written to the life insurers covered by the review to outline areas for improvement and communicate expectations for their use of investigative tools, including the obligation to handle claims efficiently, honestly and fairly.
