ASIC has issued its report on the way the life insurance industry processes claims. The report found that most life insurers are paying most claims, there are some areas that could use closer inspection, and public reporting on life insurance claims outcomes.
The review covered 15 insurers, which equates to 90 per cent of the life insurance market. Three years' of data was reviewed across a three-month period, covering life, total and permanent disability (TPD), trauma, and income protection.
ASIC wanted to know if there were systemic issues across the industry, not just in some companies such as CommInsure, who was found to have been using outdated heart attack definitions to deny some claims. (It has since corrected the error, paying out more than $2.5 million to 17 clients).
- Ninety per cent of claims are paid in the first instance
- Over $8 billion in net policy payments was made in the year ending 30 June 2016
- There was no cross-industry misconduct found, but some issues were identified in higher claims denial rates and claims handling procedures
- TPD policy denials were the highest at 16 per cent average declined claim rate
- Trauma cover had an average declined claim rate of 14 per cent
- There were large variations between insurers regarding denial rates
- The most common disputes were regarding the evidence that insurers require when assessing claims and delays in claims handling
- Direct policies saw the highest denial rates
ASIC set out some actions to improve standards in claims handling:
- With APRA, establish a new public reporting requirement for life insurance industry claims data and claims outcomes.
- Urge the government to strengthen the legal framework covering claims handling.
- Encourage the creation of a consumer dispute resolution framework for strengthening claims handling.
- Target follow-up ASIC reviews on areas of concern, including individual insurers with high decline and dispute rates, as well as a new major review of life insurance sold directly to consumers without personal advice.
- Strengthen industry standards and practices, including through extension and enhancement of the life insurance code of practice.
The insurers included in this review are:
- AIA Australia Limited;
- Allianz Australia Life Insurance Limited;
- AMP Life Limited;
- Clearview Life Assurance Limited;
- Colonial Mutual Life Assurance Society Limited;
- Hannover Life Re of Australasia Ltd;
- Macquarie Life Limited;
- Metlife Insurance Ltd
- MLC Limited;
- OnePath Life Limited;
- St Andrew's Life Insurance Pty Ltd;
- Suncorp Life & Superannuation Limited;
- TAL Life Limited;
- Westpac Life Insurance Services Limited;
- Zurich Australia Limited.