Leading insurance law firm, Maurice Blackburn has called out the life insurance industry’s failure to meaningfully reform its claims assessment culture and processes in the wake of a highly critical independent report showing widespread non-compliance with its Code of Practice.
An investigation by the administrator of the Code, the Life Code Compliance Committee (LCCC) found many insurers breached their commitment to process insurance claims and requests for reviews within certain timeframes.
The investigation was sparked by a bulk complaint lodged by Maurice Blackburn in early 2018 which alleged more than 700 instances of breaches of the insurers’ industry code within a six month period in 2017.
Maurice Blackburn Principal, Josh Mennen says today’s findings by the LCCC lend weight to the view that many insurers failed to sign up to the Code of Practice in good faith and with due preparations but rather in an attempt to rebuild their public image after damning media stories at the time.
“Today’s report suggests that despite all the rhetoric and promises to do better before and after the Hayne Royal Commission, many insurers have treated their own code as a paper tiger and this casts doubt on the industry’s ability to rebuild public trust.
“I applaud the LCCC for taking these breaches seriously and for using them to identify the continuing systemic problems within the industry,” Mr Mennen said.
“These hundreds of confirmed breaches are merely the tip of the iceberg because no doubt many more have gone undiscovered since I lodged this complaint with the LCCC two years ago.
“Given all these breaches of the Code relate to delays in the processing of consumers’ claims, the insurers should take immediate action to pay compensation, including penalty interest,” Mr Mennen said.
“We look forward to hearing a proposal for compensation from each of the insurers.”
In investigating the bulk complaint, the LCCC sampled a small number of alleged breaches and identified the systemic issues which caused the unreasonable delays and then tasked the insurers to apply those gaps and inadequacies across the affected consumers’ cases.
“So the finding that 315 breach notices were upheld is the number that the insurers were willing to accept were indeed unreasonable delays,” Mr Mennen said.
“And while Maurice Blackburn remains firmly of the belief that all 700 breach notices were genuine, we accept that the LCCC doesn’t have the resources or the mandate to investigate every single one.
“We continue to see unreasonable delay and poor communication by some insurers, however it is pleasing to see the LCCC was able to use a sample of our bulk complaint to identify the systemic and cultural problems still plaguing the industry, with a view improving the industry’s treatment of its customers” Mr Mennen said.
“It defies belief that almost 4 years after the code commenced, insurers are still yet to implement appropriate training and documents management systems to ensure compliance with their own code.”
The LCCC also criticised the insurers for failing to respond and cooperate with the LCCC in a timely manner.
“Clearly, many of the insurers must see the administrator of the Code as a toothless tiger when they take over a year to respond to its requests.
“Despite the LCCC’s best endeavours, this attitude is unlikely to change until the Code of Practice is given teeth through regulatory oversight by ASIC and meaningful sanctions for any breaches,” Mr Mennen said.
“Furthermore, it’s very disappointing that the LCCC lacks the power to identify the worst offending insurers because it hasn’t been built into its charter.
“This is a level of transparency that is employed to the industry ombudsman, AFCA and the same authority should be given to the LCCC,” Mr Mennen said.
“We know there is a vast discrepancy between the insurers in terms of effort to address these systemic problems and de-identifying the worst performers unfairly tarnishes the others.
“Had the Code had real teeth as we have been calling for several years, our clients’ cases would not have been impacted with significant delays and would instead have been dealt with in a timely fashion. “