One life insurance company is declining more than one in three total and permanent disability claims made by its customers – but Australians are not allowed to know which one it is.
Two other life insurers dismissed 25 per cent of total and permanent disability claims, while another declined 24 per cent of the same type of claims. The No.1 denier of claims rejected 37 per cent of claims.
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The revelation of mass dismissals of claims at some insurance companies was contained in a report by the Australian Securities and Investments Commission published on Wednesday.
Despite the chilling statistics, ASIC has declined to name the insurers which are denying claims en masse. Instead, it has warned the sector to clean up its act or it will start naming names.
"This review is about the performance of the industry as a whole and the need to lift standards across the board, and to identify where improvements can be made to the way claims are handled across the sector," ASIC deputy chairman Peter Kell said.
The report was commissioned by Financial Services Minister Kelly O'Dwyer after a Four Corners-Fairfax media investigation revealed Commonwealth Bank's insurance arm CommInsure had been unfairly rejecting claims by seriously injured and terminally ill policyholders.
In a separate statement from ASIC on Wednesday, the regulator said it had obtained 60,000 documents in relation to its ongoing investigation into CommInsure and had interviewed "a range of individuals".
Mr Kell said insurers in the future would have to report what percentage of claims they denied.
![ASIC has released its review into life insurance - and the findings aren't pretty.](/web/20161012153740im_/http://www.smh.com.au/content/dam/images/g/r/4/s/c/h/image.related.articleLeadwide.620x349.gs0coo.png/1476253619754.jpg)
The regulator would also review whether insurers had been mis-selling policies to people who the companies knew would never be able to claim.
"We have found significant shortcomings in a number of areas of claims handling," Mr Kell said.
"We identified issues of concern in relation to higher claims denial rates and claims handling procedures associated with particular types of policies," he added.
The report by ASIC found no "cross sector" misconduct. It did not comment on whether there were any instances of misconduct within specific insurance companies nor did it say when its full review of the sector would be completed.
At two insurers, one influence on whether claims staff received a bonus was their "decline rate" – the share of claims they knocked back.
For trauma insurance, three insurers surveyed by the corporate watchdog had a denial of payment rate of between 21 per cent and 31 per cent.
The average decline rate across the industry for TPD claims was 16 per cent, while the average decline rate across the industry for trauma claims was 14 per cent.
Other customers faced extensive delays, with 22 per cent of complaints based on claims taking too long to process.
ASIC's life insurance report came as the government sought to cap incentives paid to planners for selling life insurance at 60 per cent of the upfront premium paid by consumers.
ASIC's findings also suggest said some insurers have built conflicts of interest into the remuneration packages for claims staff.
At two insurers, one influence on whether claims staff received a bonus was their "decline rate" – the share of claims they knocked back.
"We consider that this is a potential conflict of interest that could have a detrimental effect on genuine claims, because the inclusion of this criterion is in conflict with a claim assessor's responsibility to assess each claim on its merit," ASIC's report says.
Industry Super Australia chief executive David Whiteley said it deeply concerning that planners were getting incentives for selling claims while claims staff were getting bonuses for rejecting a claim.
"Quite frankly it's bordering on immoral," Mr Whitely said.
The corporate watchdog has recommended the government beef up penalties for insurers who breach their duty to act in "upmost good faith" towards customers who make claims on their policies.
Minister O'Dwyer said the government would consider tougher penalties as part of a separate review into ASIC's powers.
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