The Australian Securities and Investments Commission (ASIC) has cleared CommInsure of any legal breaches related to using out-of-date medical definitions in policies.

It says the law allows an insurer to define what a policy covers.

“ASIC found there is no legal basis for us to take enforcement action in relation to this concern,” the regulator says in a report.

“This is because the law allows the insurer to set out the cover its policy provides and to define what it means by various terms, including medical terms.

“Under the law, it can use definitions that are out of date, as long as it clearly discloses those definitions in the policy.”

But ASIC says CommInsure has fallen short of community expectations of life insurers.

Regulators met the insurer to discuss reviewing definitions and general exclusions, and meeting conditions of the new Life Insurance Code of Practice.

CommInsure has agreed to apply its updated heart attack definition from October 2012 – when global cardiology bodies published an updated consensus on clinical markers for heart attack.

The insurer will identify consumers affected by this change and pay them compensation.

ASIC has also cleared the company of bullying its panel of doctors to reject claims.

And the regulator found “no evidence that the alleged practice in relation to doctors being selectively chosen to give preferred opinions in favour of the insurer had occurred within the claims handling function of CommInsure”.

ASIC has also cleared CommInsure of legal breaches in its claims handling processes.

“We conducted a range of enquiries, including reviewing CommInsure's relevant policies and procedures, conducting interviews including with representatives of customers, reviewing client files and conducting a review of the data and complaints retained by Financial Ombudsman Service and the Super Complaints Tribunal,” the report says.

“We also spoke to consumer legal centres to understand the issues faced by consumers.”

But again, the regulator says claims procedures fall below consumer expectations or best practice. It has written to CommInsure to address these concerns.

ASIC is continuing to investigate advertising for the insurer’s Total Care Plan, sold through financial advisers, and Simple Life Insurance, sold direct.

“Our review particularly focused on the promotion of heart attack cover within trauma or critical illness cover, and identified a number of potential concerns.

“These concerns related to statements made about the coverage provided by these products before the definition of heart attack was updated in March [last year].”