The insurance industry is set for a major shake-up after several insurers – including major groups CommInsure, TAL and Suncorp – were found by the royal commission to have allegedly unfairly declined claims by customers using old definitions or unscrupulous tactics.
The final recommendations for the general insurance and life insurance industry came after a series of heartbreaking case studies at the royal commission including the testimony of Baptist minister Grant Stewart about how his 26-year-old Down syndrome son was pressure sold worthless insurance products by Freedom Insurance.
The practices by life and general insurers were so egregious that several companies including CommInsure, TAL, Allianz, Suncorp, Youi and Freedom were recommended in the commission’s final report for criminal or civil breaches.
Justice Hayne has also recommended scrapping grandfathered commissions on life insurance products.
The final report recommends that life insurance contracts be covered by unfair contract term laws.
Such a move will make it much easier for people with insurance contracts to challenge those contracts if they use dodgy or old definitions of illnesses – a key issue for the royal commission.
The ways big insurance companies handle claims by customers should, the report recommends, be treated as a financial service.
The proposal will send shockwaves through the general insurance industry, which has long fought for its products to be treated differently to other financial products.
At the moment there is no oversight of how an insurance company handles a claim made by a customer.
Justice Hayne also recommended the the Insurance Contracts Act be amended for consumer insurance contracts to replace the duty of disclosure with a duty to take reasonable care not to make a misrepresentation to an insurer.
The federal government said it supported all of these recommendations in its interim response to the final report.
In respect of Freedom’s sales to vulnerable customers, specifically Mr Stewart’s son, Justice Hayne said: “I consider that by selling insurance to Mr Stewart’s son, in circumstances where the sales agent knew, or ought to have known, that Mr Stewart’s son did not understand what he was agreeing to, Freedom may have engaged in unconscionable conduct.”
Date: February 4, 2019
Source: The Sydney Morning Herald