The nation's best-known insurance companies have admitted a litany of misconduct including wrongly denying claims, overcharging customers and mis-selling policies, the Hayne royal commission has heard.
As the commission turns its attention to the insurance sector this week, the opening address from senior counsel assisting, Rowena Orr QC, on Monday outlined a series of admissions that insurance giants made in their submissions to the inquiry.
The insurers' acknowledgements of misconduct, which relate to the past 10 years, come ahead of hearings that will this week focus on poor practices in the life insurance sector before next week turning to general insurance, and regulation.
There are 16.9 million life insurance policies in Australia, which collect $18.3 billion in direct premiums from customers each year. The majority of these policies are included as part of people's superannuation policies, while other policies are sold by financial advisers or in call centres.
Ms Orr said life insurance giants had paid out more than $6 billion in commissions in about five years underlining the key role that potentially conflicted remuneration still plays in this industry.
Clearview, which was the subject of the commission's first case study and admitted to 303,000 criminal breaches over its cold-calling tactics, told the commission it had found 225 instances related to life insurance that might amount to misconduct or conduct below community expectations, Ms Orr said. Sixteen of these involved mis-selling.
Ms Orr revealed a roll call of Australia's biggest insurers had admitted to issues. Insurance Australia Group - which operates brands including NRMA, CGU, SGIO, Swann and Lumley Insurance - admitted to 112 instances of misconduct, Ms Orr said, including some "systemic issues" relating to its handling of claims.
National Australia Bank acknowledged 37 insurance-related incidents of misconduct or conduct below community standards. One example involved members being incorrectly rejected, or paid out less than they were owed. NAB’s MLC business acknowledged misconduct in relation to life insurance, having reported 40 legal breaches to the Australian Securities and Investments Commission (ASIC) or the Australian Prudential Regulation Authority (APRA) in the past decade.
Commonwealth Bank admitted 60 instances of misconduct, of which more than 30 related to life insurance. Examples included its reliance on out-of-date medical definitions for heart attack and rheumatoid arthritis, as exposed by Fairfax Media, and the sale of unsuitable consumer credit insurance to about 65,000 customers.
Life insurer TAL admitted to 31 cases of misconduct, such as sales practices that included misleading television and online advertisements, Ms Orr said. The commission will also turn its gaze to the treatment of mental health and mental illness in life insurance claims by TAL and the group super policies offered to members of REST Super and AMP.
Suncorp, which sells cover under brands including AAMI, GIO, APIA and Bingle, also acknowledged an unspecified number of incidences of misconduct or conduct that fell below community expectations, Ms Orr said.
Allianz identified 49 incidences of misconduct, including incorrectly debiting customers' bank accounts in 2013, and failures to respond to 6000 travel insurance claims promptly.
AMP acknowledged “possible” misconduct, including the churning of customers from one AMP policy to another in order to generate commissions for financial advisers.
Youi, which has about 1 million policies in force, acknowledged 12 cases of misconduct, including some relating to catastrophe claims. These were because it did not tell customers they were entitled to seek a review of their claim, in line with the industry’s code of practice.
ANZ Bank’s OnePath business admitted to 17 instances of misconduct in insurance over the past five years relating to insurance.
Westpac admitted to misconduct or conduct that fell below community expectations in insurance, and a document filed with the commission earlier this year listed more than 250 insurance incidents, Ms Orr said.
Global insurance giant QBE did not make any acknowledgments of misconduct in its submission, Ms Orr said, but it pointed to “issues” including add-on insurance sold through car dealers, where it has refunded about $15.9 million to tens of thousands of customers.
The hearing continues.
Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.