The corporate regulator says gaps remain in the way total and permanent disability (TPD) claims are handled, more than a year after it released a report that concluded there were industry-wide issues such as frictions in claims handling.

The Australian and Securities Investments Commission (ASIC) says TPD insurers conducted reviews of claims handling practices swiftly and took actions in several areas in response to the 2019 report.

It says insurers have made changes or plan to address consumer harms identified in the report, particularly in relation to the use of restrictive TPD definitions and onerous claims handling practices.

But there are still areas where progress or actions are lacking, ASIC says, releasing a new report giving an update on steps taken by TPD insurers to address the problems previously identified.

The latest report says data capability remains an area in need of significant enhancement while some insurers say they are finding it challenging to develop measures for determining the value of TPD sold through group insurance.

Additionally not all insurers automatically provide a copy of the claim details to consumers after tele-claim lodgement and most do not record the timing of withdrawn claims relative to a particular claim event, information which would help monitor “pain points”.

It was also found that most data gaps relate to key claim events, and this deficiency means insurers lack insight into key frictions within the claims handling process.

The report released today is based on ASIC’s re-engagement in June with nine insurers to check their further progress and currency of information previously provided to the regulator.

The nine participating insurers are AIA, AMP, Hannover, MetLife, MLC, Qinsure, TAL, Westpac and Zurich.

“ASIC’s extensive TPD review in 2019 revealed that TPD product design and claims handling resulted in poor consumer outcomes,” Deputy Chairman Karen Chester said.

“While all nine insurers are working to repair the TPD safety net in response to our 2019 findings, our follow up work reveals more needs to be done.

“Important areas for improvement remain, such as better ways to store and use data.  We found that data captured by insurers is often inconsistent or not in a searchable or reportable format, limiting its usefulness.

“To achieve good customer outcomes, insurers must lift their data capabilities. Insurers also need to invest more in their data systems to target claims handling problems, and design products to meet the needs of their target market.”

She says the industry and superannuation trustees must act now to deliver on the improvements needed to meet October 5 introduction of design and distribution obligations laws.

The ASIC report says at a minimum, insurers should complete their existing reviews, meet their commitments to undertake future reviews, and make the necessary enhancements to address ASIC’s findings and their own.

Going forward, where claims handling practices are concerned, the report says ASIC is reviewing the use of physical surveillance and non-disclosure investigations in income protection claims, and will act if it found evidence of practices in breach of the law including the duty of utmost good faith.

ASIC will also consider targeted surveillance of insurers if they do not address the consumer harms highlighted in today’s report, which covers 75% of the TPD insurance market.

Click here to access the TPD report.