The Australian Securities and Investments Commission (ASIC) has commenced Federal Court action against MLC Life, alleging “multiple insurance failures” over a 21-year period caused more than $17.5 million in financial harm to 260,000-plus customers.

ASIC claims in the concise statement lodged yesterday with the court that MLC failed to implement appropriate systems and controls to administer its insurance policies between 1999 and November last year.

“These deficiencies resulted in a systemic failure to adequately administer the insurance policies, resulting in adverse consequences for insureds including the non-provision of benefits, failures to make payments and update policy definitions, and widespread consumer harm,” the concise statement said.

ASIC alleges the insurer failed to fully refund premiums to the more than 260,000 customers who had cancelled their loan insurance policies or paid out their loans as well as notify more than 800 customers their premiums had increased, were overdue or policies had been cancelled or lapsed.

The corporate regulator also alleges MLC failed to pay a life insurance benefit known as a “rehabilitation bonus benefit” to 297 eligible customers who were going undergoing rehabilitation following an insured injury or disability.

MLC also failed to update its definition of “Severe Rheumatoid Arthritis” in a timely way, resulting in 12 customers suffering from the ailment being denied insurance cover and the insurer having to update the definition in more than 190,000 insurance policies, ASIC said.

“Consumers should be able to trust insurers to pay their full benefit in times of need and keep them informed about significant changes to their policies,” Deputy Chairman Sarah Court said today.

“This case alleges failures by MLC, over many years, to ensure a reliable delivery of basic and everyday insurance services.”

ASIC lodged the concise statement with the court’s Victoria Registry, outlining its proceeding against the insurer.

MLC Life has responded to the court action, saying it will “carefully consider” the claims by ASIC and is committed to working constructively through the legal process.

“MLC Life Insurance acknowledges the proceedings announced by ASIC… in relation to four historical breach events involving systems and control processes,” the insurer said. “These events were self-reported to ASIC by MLC Life Insurance.

“Following our internal investigations, all impacted customers were fully compensated and the events remediated and closed.”

Click here for the concise statement.