MLC Life Insurance ordered to pay $10m penalty

In a statement on Friday, the Australian Securities and Investments Commission (ASIC) confirmed that the Federal Court had ordered MLC to pay a $10 million penalty for failing to pay promised benefits resulting from a lack of appropriate systems to administer its insurance policies.

Additionally, ASIC said that the court made declarations that MLC had contravened the ASIC Act, the Corporations Act, and the Insurance Contracts Act for failing to:

• Pay a rehabilitation benefit to 119 customers who had undertaken approved rehabilitation programs following injury and/or disability.
• Have adequate processes to review and, if appropriate, promptly update its medical definitions for critical illnesses in certain policies.
• Adequately train and monitor staff about communications to customers regarding the administration of their policy, including policy schedules and premium notices.

“Customers should be able to trust that their insurer will pay the benefits promised to them and keep them properly informed if there are changes to their policies,” said ASIC deputy chair Sarah Court.

“The failings recognised by the court are the result of poor governance, poor controls and poor systems, such as legacy IT systems. MLC customers deserve to have their insurance policies administered properly.

Ms Court added that the regulator would continue to act against insurers who aren’t acting in accordance with their duty of utmost good faith towards their customers.

In addition to the $10 million penalty, MLC has provided approximately $11.8 million in remediation to approximately 1,000 impacted customers. Justice Moshinsky has also ordered MLC to publish an adverse publicity notice on its website.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.