The Financial Ombudsman Service has let fire with both barrels at Comminsure, saying the insurance giant deliberately misled it and could have “prejudiced the outcome of the dispute” with its responses to an adjudication over trauma insurance claims.
The financial services royal commission heard on Wednesday the ombudsman had made the claims in a letter to Comminsure dealing with the dispute.
“[Comminsure] statements misled us to believe that [Comminsure] did not and would not obtain the relevant medical evidence requested. The statements were made despite the fact that [Comminsure] already had that evidence in its possession,” the letter read.
The evidence in question was the assessment of a doctor that a retrospectively-introduced definition of heart attack adopted by the company would have covered a customer denied a payout.
“In our view, this conduct constitutes a deliberate failure to comply with … the FOS terms of reference,” the ombudsman service said in its letter.
“It caused significant delay in the handling of the investigation, it hampered the timely resolution of the matter for the applicant, [and] had the potential to prejudice the outcome of the dispute.”
The commission heard on Wednesday morning that Comminsure had taken a hard-nosed position on the claim in question, refusing to pay it out because it was lodged a few months before the retrospective application of a new heart attack definition applied in May 2014. The company defended its action as a “commercial decision”.
Eventually the claim was paid ‘ex gratia’ (meaning there was no admission of liability) to end the dispute, which the ombudsman had taken up.
The commission heard the decision to introduce and backdate the new definition was made a few days after ABC’s Four Corners program had aired serious allegations of misbehaviour at Comminsure. They included denying valid claims and mistreating customers.
Comminsure executive general manager Helen Troup told the commission “there were some extremely serious allegations made against CommInsure on the Four Corners program and they were found to be unsubstantiated, and that was a very good outcome for CommInsure”.
Counsel assisting Rowena Orr QC took up the point: “You say they were found to be unsubstantiated. The findings of ASIC were that there had been no contraventions of the law but that in many respects the practices of CommInsure were a matter of concern.”
Ms Troup agreed but said the findings of no criminal behaviour had been important as such claims go “to the heart of a life insurance company”.
Ms Orr said Comminsure’s decision to backdate the definitions of a heart attack to May 2014 were very conservative. “The cost … was originally estimated to be $14.7 million … with a possible range of $7.3 million to $22 million.”
However the cost to the company came in at only $2.5 million.
Eventually, after intervention from ASIC, the new definition was quickly backdated to October 2012 because the actual costs had been so low, Ms Orr said.
Comminsure’s chief medical officer recommended that the company move to a new definition from 2007, Ms Orr said. This advice was not followed.
The issue of defining heart attacks first emerged in 2012 but was not acted on.