ASIC released its report on life insurance claims yesterday but its findings are unlikely to be limited to life insurance.
ASIC Report 498 has found that there are significant shortcomings in a number of areas of life insurance claims handling and that regulatory reform is required. A copy of Report 498 and ASIC's media release are available here: 16-347MR ASIC issues industry review of life insurance claims
The Report includes specific actions that ASIC will pursue to improve standards in life insurance claims handling. The key proposals likely to affect both life and general insurance are:
- Strengthening the legal framework covering claims handling
ASIC proposes legislative change to remove the exemptions for claims handling from the definition of financial service in Chapter 7 of the Corporations Act. There is no suggestion that this would be limited to life insurance claims. It would mean that a licence would be regard to engage in claims handling. It would also mean that the general licensee duties would apply to claims handling, including efficiency, honesty and fairness, conflicts management, compliance and competence and, for licensed intermediaries, requirements to have adequate resources, risk management and compensation arrangements.
- Strengthening the consumer dispute resolution framework for claims handling
ASIC has in mind that external dispute resolution bodies, i.e. FOS, should be able to give more effective consideration of fairness and provide better remedies for delays in claims handling.
These are significant developments for the core part of any insurance business.
Other actions that ASIC will take that should not directly affect general insurers include:
- establishing with APRA a new public reporting requirement for life insurance industry claims data and claims outcomes including claims handling timeframes and dispute levels across all policy types with data made available on an industry and individual insurer basis – presumably this will be done through an APRA reporting standard
- targeted follow-up ASIC reviews of life companies on the following areas of concern:
- declined claim rates
- dispute rates
- TPD claims
- data reporting
- sales practices, and
- policy definitions
- requiring life companies in these areas, including:
- possible amendments to the new life insurance code of practice
- examining advertising and representations made about the scope of cover
- ensuring claims timeframes are consistent with industry good practice and properly communicated to policyholders
- monitoring the conduct of fraud risk investigators
- ensuring that incentives and performance measurements for claims handling staff and management do not conflict with the obligation to assess each claim on its merit.
General insurers should however consider reviewing their own practices to ensure that the issues raised by ASIC do not arise in their own businesses.