CommInsure negotiated penalty for misleading heart attack cover advertising

CommInsure negotiated penalty for misleading heart attack cover advertising

CommInsure, a subsidiary of the Commonwealth Bank, made a voluntary $300,000 “community benefit payment” as part of a deal with the corporate regulator to avoid a multi-million-dollar fine for misleading advertising.

The insurer failed to adequately disclose in its advertising that its heart attack cover was limited to severe heart attacks, as defined by CommInsure using an out-of-date definition.

Instead, customers would have to access and read the product disclosure statement.

CommInsure’s managing director Helen Troup acknowledged that customers could be misled into thinking CommInsure’s trauma insurance covered all heart attacks when she appeared before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on Thursday.

The maximum penalty per contravention is 10,000 penalty units — $1.8 million — and CommInsure breached the law multiple times, however it reached an agreement with the Australian Securities and Investment Commission (ASIC) to make a $300,000 community benefit payment instead.

Royal Commissioner Kenneth Hayne asked Ms Troup to confirm that ASIC was “asking [CommInsure] whether the proposal was sufficient in the eyes of the party alleged to have broken the law”.

Ms Troup said that it “was the alternative” to CommInsure “continuing to defend” its position.

But senior counsel assisting the Royal Commissioner, Rowena Orr QC, suggested that CommInsure did not need to defend its position “because you were going to be able to consult with ASIC about a mutually-agreeable resolution of the matter.”

Although Ms Troup said “ASIC always reserved the right to continue the enforcement action”, Ms Orr pointed out that correspondence between CommInsure and ASIC “is not suggestive of ASIC considering … any enforcement action”.

Ms Orr also asked Ms Troup to explain “the difference between CommInsure’s [previous] position … and your position here in evidence at the Royal Commission today.”

CommInsure had ample opportunity to acknowledge its misleading and deceptive conduct, but never changed its position until Ms Troup came before the Royal Commission.

Ms Troup said: “At that time we were still defending our position.”

“At the time we felt we had elements of defence,” she continued after further questioning.

Among those elements was the expectation that customers would realise the insurance policies used specific definitions.

Commissioner Hayne interjected: “You don’t think a consumer reading the website might think that, ‘heart attack, medical term, if the doctor tells me I’ve had a heart attack, I’ve had a heart attack’?”

He then asked Ms Troup whether CommInsure got off lightly.

“The $300,000 community benefit payment was a form of punishment,” Ms Troup said.

“A very small amount, was it not, Ms Troup?” the Commissioner fired back.

CommInsure has since updated its heart attack definition.

Yesterday it was revealed that CommInsure had misled the Financial Ombudsman Service (FOS) in regard to a heart attack claim that was the subject of a Royal Commission case study.

CommInsure misled the FOS into thinking that CommInsure had not assessed the claimant against the new heart attack definition by redacting part of a document sent to the FOS and the inclusion of a sentence implying a new assessment had been done.

The insurer actually had a medical opinion that found that the claimant did meet the updated definition.

CommInsure also withheld information that delayed the dispute resolution process, and the FOS referred CommInsure to ASIC for investigation after forming a view that the insurer’s actions may amount to “serious misconduct.”

Ms Troup conceded CommInsure’s actions were inappropriate.

But despite finding that CommInsure likely misled the FOS, ASIC took little action apart from reprimanding CommInsure and telling it to implement changes to ensure it did not happen again.

Breast cancer definitions also emerged as a problem at the Royal Commission hearing on Thursday.

CommInsure’s definitions required “radical” surgery for a payout, but in a case study reviewed by the Royal Commission CommInsure denied a claim because the claimant did not require a full mastectomy.

In a letter to CommInsure disputing the decision, the claimant pointed out that: “At no point does [the policy] define radical”.

The woman said that the “ample nature of my breasts meant that I did not require a mastectomy”, but that had they been smaller she would have required a full mastectomy according to her surgeon.

Because surgeons attempt to preserve as much breast tissue as possible, full mastectomies have become rarer than at the time the outdated policy definition was written.

CommInsure was slow to respond to requests for information from the FOS in relation to this case, and missed deadlines.

After the claimant declined a settlement offer of half the payout, the FOS found in her favour.

Ms Troup told the Commission that the FOS made the correct decision and admitted that CommInsure’s prolonged dispute of the claim caused the customer distress.

She said CommInsure will review its claims history, but said it was unlikely to find similar cases.

Ms Orr informed the Commission that eight out of 10 life insurers accepted they had inadequate processes for reviewing and updating medical definitions.

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