Life insurers getting away with mass rejecting disability claims

Life insurance is a serious investment, and is meant to set you up for many things – including being able to claim for total and permanent disability.

One life insurance company is declining more than one in three total and permanent disability claims made by its customers – but Australians are not allowed to know which one it is.

Two other life insurers dismissed 25 per cent of total and permanent disability claims, while another declined 24 per cent of the same type of claims. The No.1 denier of claims rejected 37 per cent of claims.

The revelation of mass dismissals of claims at some insurance companies was contained in a report by the Australian Securities and Investments Commission published on Wednesday.

Despite the chilling statistics, ASIC has declined to name the insurers which are denying claims en masse. Instead, it has warned the sector to clean up its act or it will start naming names.

“This review is about the performance of the industry as a whole and the need to lift standards across the board, and to identify where improvements can be made to the way claims are handled across the sector,” ASIC deputy chairman Peter Kell said.

The report was commissioned by Financial Services Minister Kelly O’Dwyer after a Sydney Morning Herald report revealed Commonwealth Bank’s insurance arm CommInsure had been unfairly rejecting claims by seriously injured and terminally ill policyholders.

In a separate statement from ASIC on Wednesday, the regulator said it had obtained 60,000 documents in relation to its ongoing investigation into CommInsure and had interviewed “a range of individuals”.

Mr Kell said insurers in the future would have to report what percentage of claims they denied.

“We have found significant shortcomings in a number of areas of claims handling,” Mr Kell said.

“We identified issues of concern in relation to higher claims denial rates and claims handling procedures associated with particular types of policies,” he added.

For trauma insurance, three insurers surveyed by the corporate watchdog had a denial of payment rate of between 21 per cent and 31 per cent.

The average decline rate across the industry for TPD claims was 16 per cent, while the average decline rate across the industry for trauma claims was 14 per cent.

Other customers faced extensive delays, with 22 per cent of complaints based on claims taking too long to process.

The corporate watchdog has recommended the government beef up penalties for insurers who breach their duty to act in “upmost good faith” towards customers who make claims on their policies.

Do you have life insurance? Are you worried your insurer might be on the list? Do you think the people have a right to know?