The Australian Securities and Investments Commission (ASIC) has reiterated calls for the removal of the exemption of insurance claims handling from the financial services conduct provisions of the Corporations Law following the release of its report into CommInsure’s claims handling process.
In a media conference yesterday, deputy chair, Peter Kell said if those exemptions were removed from the Corporations Law, it would allow ASIC to broaden its investigation into the claims handling process of someone like CommInsure where it did not currently have the legal option or remedy to do so.
“That ranges from issues such as the time taken and the communication around the claims handling, some of the issues around the way in which surveillances are conducted and so on,” Kell said.
“So I don’t necessarily want to speculate on any particular aspect but I think you can tell from the strength of our advocacy for some law reform here that we do believe that it will make a difference.
“We do believe it will enable us to better address some of the concerns.”
The comments came as the ASIC report cleared CommInsure of any wrongdoing as per the law, saying that while it used medical definitions in its trauma policies for heart attack and severe rheumatoid arthritis that were out of date with current medical practices, it was not against the law because the law allows an insurer to set out the cover its policy provided.
However, ASIC noted this was against community expectations as consumers could not be expected to know whether medical definitions were already outdated when they bought life insurance.
Kell’s calls reiterated recommendations made by ASIC last year in its broader industry review of life insurance claims, where it called for ASIC’s penalty powers to be increased to enable it to enforce more stringent penalties for misconduct in relation to insurance claims.
Kell said the “explicit” exemption for claims handling for consumer protection provisions in Chapter 7 of the Corporations Act should be removed.
“To give some credit where it’s due when we released our broader report on claims handling and life insurance late last year, the minister’s [Minister for Revenue and Financial Services, Kelly O’Dwyer] response (this was in October), one of her responses was to publicly indicate that she wanted those law reform propositions included in the current review that’s under way of ASIC’s enforcement powers and penalties. That from our perspective was a very positive step,” he said.
He said he would also like to see stronger penalties for breaches of utmost good faith.
“At the moment, if we took action on breaches of utmost good faith which is a pretty high threshold we’re not even able to seek a penalty for that.”
Kell also said ASIC would like to see the exemption for insurance that currently existed for unfair contract terms legislation removed, which he said was currently being considered as part of the Australian Consumer Law review.
