CBA’s life insurance business CommInsure admitted to the banking royal commission that it misled FOS in order to deny the payout of a trauma insurance to one of its customers.
In her closing address last week, senior counsel assisting Rowena Orr said that “there were aspects of CBA’s dealings with FOS that were concerning”.
However, she was interrupted by commissioner Kenneth Hayne, who suggested that CommInsure may have breached its contract with FOS.
“It occurs to me that there is at least some textual footing in the terms of reference as they stood as amended at 1 January 2015 for the notion that the terms of reference bind the financial services provider.”
Mr Hayne read out a section of the FOS terms of reference, which states:These terms of reference are binding upon financial service providers.
“Presumably the mechanism is contract? Perhaps contract in light of statutory obligations. But ultimately, contract,” Mr Hayne said.
“Now, financial services providers in their submissions can no doubt tell me how and why that is or is not the case.”
The commissioner’s comments follow the appearance of CommInsure managing director Helen Troup as witness on Wednesday, 12 September.
Ms Orr asked Ms Troup whether, in one of CommInsure’s emails, it was fair to say its group customer relations officer misled FOS into thinking it didn’t have a medical report on whether the customer satisfied the updated heart attack definition, when in fact the opposite was true.
“Do you accept that?” Ms Orr asked.
“Yes,” Ms Troup responded.
“Is that acceptable, Ms Troup?” Ms Orr asked.
“Absolutely not,” Ms Troup said.
Ms Orr also noted the medical opinion CommInsure sent to FOS in response to their request for justification in rejecting the customer’s claim.
She pointed to a sentence in that medical opinion, and asked Ms Troup whether it conveyed that CommInsure didn’t have an opinion about whether the customer met the updated definition of a heart attack, when in fact it did have an opinion and that it was favourable to the customer.
“That’s right,” Ms Troup said.
Ms Orr then asked whether CommInsure had made a decision to redact the part of the medical opinion favourable to the customer from the version it sent to FOS?
“That’s right,” Ms Troup said.
“And this email to FOS was misleading, was it not?” Ms Orr asked
“Unfortunately, yes,” Ms Troup conceded.
The sixth and final round of royal commission hearings concluded last week. Commissioner Hayne will submit an interim report no later than 30 September 2018, and will provide a final report by 1 February 2019.
In the context of the wide-ranging enquiry into many sectors within financial services, I think the RC and Orr in particular, has been pretty forensic and clever in bringing the case studies it/she has to light. These examples all point to areas of concern that we all have and allow future investigations to highlight the legal position of those practicing and may also allow prosecution of those proven to be in breach – which has previously only been “easy” with smaller players who can’t afford the army of lawyers that the biggest players have. ASIC will no doubt be able to justify better funding as a result and while we don’t like the way ASIC concentrates on small players currently, we should not be surprised – and in fact should expect that ASIC will start dealing with the bigger end of town too from here on. We need a strong ASIC just as we need ASIC to have the guts and gonads to go after the big operators (who clearly can NOT self-regulate) and we must expect that ASIC won’t expect the smaller players to be able to self-regulate if the big players can’t…despite that not necessarily being the case. e.g. Dover did a better job than any of the bigger players, despite its “protection” being skewed a lot more to itself than to its customers – but the logic in telling clients that Dover could only be responsible for legal work rather than fraudulent work was not in itself unreasonable – and is exactly what the bigger players practice when they caste out “miscreant, non-compliant advisers” rather than take responsibility for their actions.