ANZ, NAB review life insurance in wake of CBA scandal

ANZ and National Australia Bank are to internally review their life insurance units in the wake of the Commonwealth Bank of Australia's life insurance scandal that has sent shockwaves through the industry. As we noted last week, the Australian Securities and Investments Commission (ASIC) has begun a full-blown investigation into "very troubling and shocking stories" regarding denied claims and out-of-date policy definitions of the insurance arm of Commonwealth Bank, CommInsure.

CommInsure allegations exposed in a joint media investigation by Fairfax Media and Four Corners includes manipulation of medical reports, missing files, doctors being leaned on by claims managers to change their opinions, cherry picking of doctors, deliberately keeping old policy definitions, such as heart attacks and rheumatoid arthritis, to deny claims and adopting unethical policies to delay or deny payments to terminally ill patients and claimants – in some cases their own employees – of total and permanent disability payments.

Bulk of business sold

Many of these allegations were made by CommInsure whistleblower Dr Benjamin Koh, who was the life insurer's chief medical officer until he was sacked in August 2015, eight months after he blew the whistle to CommInsure. He also wrote to Ian Narev the day after he was sacked.

The Financial Review can reveal that in response to the Fairfax Media and Four Corners joint media investigation, National Australia Bank, which recently sold 80 per cent of its life insurance business to Nippon Life, will set up a formal process to review past denied claims practices going back to January 1, 2014, with a focus on critical illness.

An NAB spokesman said the bank believed it had the right claims processes in place, but that "an appropriate and independent review process is the right thing to do to provide our customers certainty". The life business has more than 1.76 million policyholders.

ANZ, which has more than 237,000 life insurance policyholders, said it had begun a review, or "look back" at its life insurance declines. A spokesman said while the review was yet to be finalised, no issues had been identified. He said the bank's managing director of wealth Australia, Alexis George, met claims staff and its chief medical officer mid week "and was reassured we are holding ourselves to the high standards we expect".

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Westpac, which offers life insurance through its BT business, said in a statement: "BT normally reviews existing policy terms and conditions every year, and no later than every 3 years. This includes ensuring that we are taking into account medical advancements and definitions. This ensures appropriate claims get paid and life insurance policies stay relevant."

Operation under review

AMP said its business had been under review for the past two years, following a period of structural change across the sector from 2013. "At that time AMP recognised the need for change in our business and two years ago decided we needed to take a more human and empathetic approach to how we deal with our customers across the whole company, including life insurance."

While Brett Clark, the CEO of one of the country's biggest life insurers, TAL, which has 4 million policyholders, said: "Clearly in light of recent events and media there is additional focus on claims outcomes for customers.

"At TAL we always aim to do the right thing for our customers, and while we have not initiated any specific claims review processes, we take these matters seriously … In addition I have spoken to all our staff at TAL to remind them that our commitment to all of our customers always comes first."

CBA has also responded. CBA boss Ian Narev said he was "saddened" at the treatment of customers outlined in the Four Corners program, but said: "Having had these cases brought to the attention of senior management within the last few days, we have acted on unresolved matters."

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Not so for heart attack victim James Kessel who had his claim rejected in December 2014 based on an out-dated heart attack definition that CommInsure executives had been told about in mid 2014. Mr Kessel is yet to hear.

The bank released an updated response to its review last Thursday, saying it had "accelerated" a planned upgrade of its definition of heart attack and severe rheumatoid arthritis in its trauma product. It said it had backdated those definitions to May 2014.

For people like former Cisco Systems director Michael Gill, who was struck down with severe rheumatoid arthritis in 2010 based on a definition that is years out of date, the back dating of the definition to May 2104 doesn't extend far enough.

Terms of reference not disclosed

In a statement, the CommInsure board said that in response to Dr Koh's allegations in 2014 it had commissioned an independent review. "CommInsure has taken a range of actions, including benchmarking of product features, targeted review of customer claims, governance changes to enhance structural independence and additional training for claims staff, including customer empathy and professional protocols."

The statement didn't say who conducted the review or the terms of reference. Interestingly, Dr Koh was never approached by the independent expert either during his tenure or after he left.

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CommInsure, which has 4.4 million policyholders, said it would introduce an additional layer of "independence" to its claim assessment and decision making process.

"Where CommInsure's claims committee recommends a complex claim be declined, it will be referred to an independent review panel. The panel will consist of the managing director of CommInsure [Helen Troup] and at least two independent industry experts, who will be announced within the next month."

It said it would appoint an independent expert to oversee a claim review program focused on declined claims. It will be interesting to see how the review process will operate, how claims will be selected for review and how far back that process will extend.

However, going by the hundreds of emails and phone calls received by myself and Four Corners in the past few days and the fact that claimants are either sick or dying, let's hope the review is quicker than the compensation scheme CBA put in place to address its financial planning scandal. Put simply, let's hope these people get justice before they die.

Urgent report ordered by minister

Minister O'Dwyer said the government had asked ASIC for an urgent report into CommInsure and the broader industry. This will include reviewing data from the Financial Ombudsman Service (FOS) and Superannuation Complaints Tribunal (SCT).

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The investigation will be a challenge given the savage budget cuts ASIC has faced under this government and the fact that claims processes isn't an area ASIC would normally cover.

Nevertheless, it is understood that ASIC won't accept CommInsure's review unless there is proper independent oversight, the scope is appropriate, there is public reporting of overall outcomes and mechanisms are put in place to allow consumers to resolve any disputes.

The CommInsure scandal has rocked the industry. The life insurer put profit before sick and dying people.

That is not okay. CBA chairman David Turner told shareholders in November that CBA aspired to be the ethical bank. His silence on the bank's latest unethical behaviour has been duly noted.