Australia's financial services regulatory body is looking to "substantially improve" its ability to help with the oversight of the life insurance industry following a number of high-profile disputes, a senior regulatory official told S&P Global Market Intelligence on the sidelines of the Life Insurance Conference in Sydney on March 30.
Following its investigation into CommInsure — an insurance unit of Commonwealth Bank of Australia that had faced allegations stemming from an investigation by local media agencies that it denied customer claims by using an outdated definition for measuring heart attacks — the Australian Securities and Investments Commission has asked for legal reforms so that life insurance claims handling falls under the regulator's review under the Corporations Act, said Peter Kell, the commission's deputy chair.
ASIC determined in March that CommInsure did not violate any laws, although it considered the practice to be out of step with consumers' expectations.
"To put it bluntly, the laws that currently apply to claims handling [in the life insurance sector] are far too light," Kell said.
Kell added that the regulator is also seeking changes to the national consumer law to include insurance contract terms regulated by the Insurance Contract Act, and has called for harsher penalties for any legal breaches relating to life insurance claims.
The Australian government has agreed to look at the proposed reforms as part of a current review of ASIC's enforcement powers, Kell said, though lawmakers may not pass any resulting legislation within the year.
ASIC published a report in October 2016 suggesting that while 90% of Australian life insurance claims are paid in the first instance, poor or inconsistent management of a small number of claims "can lead to very poor outcomes for consumers and significant reputational damage for insurers."
Meanwhile the Financial Services Council, a nongovernmental organization representing the country's wealth managers, has published a life insurance code of practice, which comes into effect July 1, and includes guidance for a fair and transparent claims process.
The code of practice could lift standards in some areas that have been a subject of public concern, including the way life insurance is sold and their claims managed, Kell said.
He did say, however, that there was a need for ASIC to have the power to regulate claims handling.