ASIC has announced the findings of its industry-wide life insurance review, saying there are “significant shortcomings” in a number of areas in claims handling.
In March, ifa reported that ASIC would conduct a wide investigation into claims handling following the CommInsure scandal.
In an announcement today, ASIC said it has found “a clear need for public reporting on life insurance claims outcomes at an industry and individual insurer level”.
While the review did not find evidence of cross-industry misconduct, it did identify issues of concern in relation to higher claims denial rates and claims handling procedures.
For instance, there were higher claims denial rates in relation to insurance policies sold direct to consumers with no financial advice, compared to policies sold through advisers and group insurance policies, ASIC said.
The rates of declined claims were highest for total and permanent disability cover (average declined claim rate of 16 per cent) and trauma cover (average declined claim rate of 14 per cent).
There was also a “considerable variation” in declined claims among insurers, with TPD denial rates being as high as 37 per cent and trauma up to 25 per cent for some types of cover.
The most common types of life insurance disputes were about the evidence insurers require when assessing claims (including surveillance), and delays in claims handling, the review found.
In an effort to improve claims handling standards, ASIC has established with APRA a new public reporting requirement for life insurance industry claims data and claims outcomes.
“To improve public trust, there is a clear need for better quality, more transparent and more consistent data on life insurance claims,” ASIC said.
“ASIC and APRA will work with insurers and other stakeholders over 2017 to establish a consistent public reporting regime for claims data and claims outcomes, including claims handling timeframes and dispute levels across all policy types. Data will be made available on an industry and individual insurer basis.”
The six-month review examined 15 insurers covering more than 90 per cent of the market. It analysed three years' of data on the four major life insurance policy types: term life cover, TPD, trauma, and income protection.
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