The banking royal commission slammed the behaviour of many financial service providers with most ‘cleaning up their act’. Parts of the insurance industry, however, would appear to be a work in progress.
During its investigations, the commission highlighted the practice of some insurers spying on policyholders, particularly those claiming mental health issues. Suncorp admitted to the commission that it had spied on 17 per cent of policyholders who had made mental health claims in 2014 and `15.
Another insurer, TAL, admitting its spying had been inappropriate and, at times, amounted to bullying.
The Australian Securities and Investments Commission (ASIC), which took legal action against TAL as a result of the commission’s findings, has been taking a closer look at the insurers’ conduct in relation to spying and is flagging concerns.
ASIC has released the findings of a review into insurance companies’ dealings with claims for disability income insurance, which provides cover to people who are unable to work due to illness or injury.
The review took in nearly 4800 individual disability income insurance claims received between 1 January and 30 June 2021, and found insurers still needed to ensure consumers were protected from unfair practices in non-disclosure investigations and physical surveillance.
A media release accompanying the delivery of the report stated: “ASIC has longstanding concerns about the potential consumer harm resulting from overuse of intrusive claims handling practices like non-disclosure investigations and physical surveillances.”
The royal commission cited several instances of physical surveillance and ASIC’s review was instituted to determine if, and by how much, insurers’ conduct had improved.
Changes to the Corporations Act on 1 January 2022 mean that the scope for misconduct within legal frameworks is now much narrower, and insurers are legally obliged to act efficiently, honestly and fairly when handling claims.
The changes mean that insurers, though still legally able to use surveillance for claim-checking purposes, must exhaust all other avenues of gleaning information before doing so. ASIC deputy chair Karen Chester said it had “identified concerns around mental health claims and investigations”.
“Non-disclosure investigations and physical surveillance are intrusive measures and insurers must ensure they have reasonable grounds to undertake them,” she said. “We expect physical surveillance to be used as a last resort only.”
ASIC’s review, in which TAL, Westpac Life Insurances and Zurich Australia among others took part, found that non-disclosure investigations were conducted in around 5 per cent (252) of claims and physical surveillance was conducted in around 1 per cent (57) of claims.
Ms Chester said ASIC was continuing inquiries into insurers that had a higher proportion of potentially unwarranted investigations and concluded with a warning: “We are putting insurers on notice that we will take action where we see consumer harm from poor claims handling practices.”
Have you made a disability insurance claim? Are you aware of your insurer using ‘spying’ tactics? Why not share your experience and thoughts in the comments section below?