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Royal commission opens insurance hearings

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The Hayne royal commission today opened its insurance-round hearings with examples of misconduct and cases where behaviour has fallen short of community standards and expectations.

Counsel Assisting, Rowena Orr, outlined cases from the past decade, including add-on insurance problems, failings identified by the Victorian Fire Services Levy Monitor, delays in paying claims and complaints handling problems.

Claims issues and laws limiting the Australian Securities and Investments Commission’s (ASIC) ability to act will be examined by the commission in the next two weeks, Ms Orr says.

She says the hearings will consider whether it is appropriate for claims to be “largely outside” ASIC’s jurisdiction.

“This limits ASIC’s ability to take action against insurance companies, where, for example, there are unnecessary or extensive delays in handling claims,” she said in an opening statement.

Ms Orr says ASIC also has limited ability to respond if an insurer breaches utmost good faith terms in the Insurance Contracts Act.

“There is currently no penalty imposed for breaching the duty of utmost good faith. This means ASIC cannot bring proceedings against an insurer to cover a penalty where it believes the insurer has breached this duty.”

The royal commission will consider whether unfair contract terms provisions should apply to general insurance and the effectiveness of industry codes of practice.

Ms Orr says this week will focus on life insurance, with attention turning to general insurance case studies next week.

Insurers were asked to provide submissions to the commission, outlining cases of misconduct or behaviour that fell below community standards and expectations over the past decade.

Companies noted today included Allianz, ANZ, Commonwealth Bank, IAG, MetLife, Suncorp, TAL, Westpac, Youi and Zurich.

IAG acknowledges problems with add-on insurance, premium prices found excessive by the Victorian Fire Services Levy Monitor and commissions paid by its subsidiary, Swann, on consumer credit insurance.

“The conduct of Swann and IAG in connection with the sale of add-on insurance through motor dealers will be the subject of a case study in these hearings,” Ms Orr said.

Suncorp has highlighted problems with dispute resolution processes, medical definitions in life policies, surveillance issues and add-on insurance. Misleading advertising breaches will be the subject of a case study.

QBE has not provided examples of conduct failings, but highlights issues related to gap cover sold through car dealerships, delays implementing Financial Ombudsman Service determinations and overcollection errors related to the Victorian fire services levy.

The dealership problems affected an estimated 28,520 customers, with QBE establishing a remediation program that is estimated at $15.9 million.