OnePath pulled up for breaching good faith duty
The Australian Securities and Investments Commission (ASIC) has commenced proceedings in the Federal Court against OnePath Life Limited for allegedly breaching its “duty to act with utmost good faith during claims handling”.
ASIC’s statement said while the insurer does not have to pay out a policy on the basis that a customer acts fraudulently, it also failed to fully investigate the customer’s explanation and inform the customer of their rights to appeal the decision.
“Insurers play an important role in providing financial security to consumers, particularly in times of crisis,” ASIC Deputy Chair, Sarah Court, said.
“Consumers need to be confident that their insurer will act in good faith and provide procedural fairness when handling their claims. Now more than ever, Australian insurers need to focus on their claims handling procedures and ensure they are meeting their legal obligations.”
In its first time seeking penalties for a failure of this duty since the introduction of new civil penalties in 2019, the case involves a customer who disclosed prior mental health related issues to their ANZ financial adviser when taking out a OnePath Life income protection policy in 2016.
The customer submitted a claim on the policy in 2018 after suffering a shoulder injury, after which OnePath Life investigated their prior medical history and found they had been hospitalised years before for mental health issues. The insurer did not pay out the policy based on the notion that the customer had “acted fraudulently by failing to disclose the hospitalisation”.
ASIC said OnePath Life has failed to “act with utmost good faith in the handling of the customer’s claim by:
- Failing to make clear to the customer it was concerned that the lack of disclosure was fraudulent,
- Failing to fully investigate the customer’s explanation for the non-disclosure, including failing to speak to the ANZ adviser about the completion of the application for the insurance, and
- Failing, when it avoided the policy and denied the shoulder injury claim, to inform the customer of the right to appeal the decision through OnePath Life’s internal dispute resolution process or by filing a complaint with the Australian Financial Complains Authority.”
“If an insurer is concerned a customer has engaged in fraudulent non-disclosure, they must make their concerns explicit, give the customer the opportunity to respond and make proper inquiries into any explanation given by the customer before concluding that fraud has occurred,” Court said.
“The insurer’s duty is not just owed to whoever the insurer considers to be a perfect policyholder. Insurers deal with their consumers at their most vulnerable.
“This makes it crucially important that they ensure their customers understand their rights, including their rights of appeal if an insurance claim is declined.”
Zurich Financial Services Australia, OnePath Life’s parent company, made a statement acknowledging ASIC had commenced civil proceedings in relation to the handling of the 2018 claim and confirming it is “committed to working constructively through the Court process”.
So the QAR recommendations are to let product provider back into advice (sorry product flogging). Looks like Michelle Levy consultation was very narrow or the recommendations had already been determined.