Urgent reform is needed to prevent insurers unfairly denying claims based on unrelated pre-existing health conditions, and accessing medical records dating back more than five years prior to the policy inception, according to the Australian Lawyers Alliance.
ALA spokesperson, Josh Mennen, said the current regime was disproportionate and unfairly tilted in favour of the insurer.
“It permits the insurer to take a sledgehammer to the policy where a scalpel would be more appropriate,” said Mennen.
The spokesperson said claims were too often denied by insurers after they trawled through a claimant’s medical history and found an undisclosed (and resolved) condition in the history of the claimant, highlighting a reference to depression or anxiety as an example.
“It is too easy for insurers to deny claims in circumstances where the non-disclosure was an innocent un-related mistake and the insurer would have provided a policy to the consumer anyway on slightly different terms,” he added.
The ALA outlined its position in a submission responding to policy questions arising from the Banking Royal Commission and is calling for courts to have the discretion to disregard insurer avoidance for innocent non-disclosure in circumstances where it would be harsh or unfair to deny a claim.
The ALA also proposes insurer surveillance of consumers with mental health conditions should only be allowed with prior approval of an independent body.