TAL faces possibly heavy financial penalties of up to $1.7 million over alleged misconduct involving its handling of an income protection claim.

The Australian Securities and Investments Commission (ASIC) commenced civil action against the life insurer after an investigation, following a referral by the Hayne royal commission.

ASIC says its investigation found TAL had breached the ASIC Act and Insurance Contracts Act when it “avoided” the claim lodged by the client in January 2014. The client, whose identity is withheld under a non-publication order, was known as “second insured” during the royal commission’s hearings of the TAL case studies.

ASIC claims TAL carried out an investigation of the client’s medical history based on false statements it had sent to her in a claims pack.

The regulator also alleged TAL breached the laws when it avoided the policy without first offering the insured an opportunity to address concerns, as well as accusing the client of not meeting her disclosure obligations.

The maximum penalty for false or misleading misrepresentation under the ASIC Act is $1.7 million.

The first case management hearing, originally set for last Friday in Melbourne, has been moved to March 2 to the NSW District Registry in Sydney.