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Royal Commission Live

17:06 AEST, 21 September 2018

FRIDAY’S SUMMARY: Hayne nightmare over for insurers – or is it?

FRIDAY’S SUMMARY: Hayne nightmare over for insurers – or is it?

The Hayne royal commission has finished examining general insurers, but the industry cannot afford to relax just yet.

The executives will breathe a sigh of relief to be out of the spotlight, but further reports are still pending, and the commission’s findings could yet inflict further pain.

In closing submissions, Allianz and IAG were warned they could be found to have engaged in misconduct, while remarks on Youi and Suncorp were delayed and will be presented in writing due to the complexity of the case studies.

Earlier in the day Insurance Council of Australia (ICA) CEO Rob Whelan came under fire over the lack of sanctions taken against members who breach the code of practice, particularly given failures in the sale of add-on products.

Counsel Assisting Rowena Orr said that since July 2014 the code governance committee (CGC) had determined breaches in 33 cases, subscribers had conceded breaches during an investigation 689 times, and there had been self-reporting of some 31,000 incidents, but no sanctions were applied.

“The sanction power only kicks in if the breaches that have been identified and reported to the CGC are not remedied and resolved or corrected,” Mr Whelan said.

Customers were taken advantage of during the sale of add-on cover through car yards and the industry hadn’t properly overseen intermediaries, he acknowledged, while highlighting obligations would be clearer in the next version of the code.

“And what makes you think that this time the industry will observe those obligations when they haven’t observed them in the previous iterations?” Ms Orr asked.

“It has been a salutary lesson,” Mr Whelan said. “The industry’s under no illusion that they need to undertake a much more rigorous approach to how distributors sell their products.”

The add-on sales issue shows the limitations of self-regulation but the ICA still believes self-regulation in conjunction with the “black letter” law is the best approach, he told the commission. He is against including the code as part of consumer contracts.

On the issue of unfair contract terms, Mr Whelan was asked to justify why insurers should be treated differently from other forms of financial services.

He explained it would be difficult to price premiums if insurers couldn’t be clear about the extent of the risk they were taking on.

In closing submissions, Ms Orr said it is open to the commission to find that Allianz engaged in misconduct in relation to each of the misleading statements that were allowed to remain on its website.

Failing to report that misleading and deceptive conduct to ASIC could also have amounted to misconduct, as could a failure to have an adequate compliance system in place.

Ms Orr highlighted a number of ways that Allianz engaged in behaviour falling below community standards, including by seeking to “manipulate” independent reports.

She says “for many years” Allianz had inadequate processes for monitoring content on its own website, and inadequate processes for monitoring compliance incidents.

Ms Orr says monitoring and supervision “remains an issue” at Allianz. She says Allianz’s culture does not consider risk and compliance a priority, and responds in a defensive way when challenged.

The commission could find that this is one of the reasons for the alleged misconduct.

Counsel Assisting Mark Costello suggested the commission could find Swann Insurance engaged in misconduct by continuing to sell add-on insurance even after it was aware of ASIC’s concerns.

It also gave incentives to authorised representatives (ARs) to sell as many add-on policies as possible with no regard to the suitability of those products, and had no proper oversight of its ARs.

The commission is open to find that one of the reasons for this behaviour is Swann's culture of pursuing profit above the interests of its customers. IAG failed to have proper oversight of its subsidiary Swann, Mr Costello said.

Ms Orr said final submissions on the natural disaster case studies are complex and will be submitted in writing.

A further report containing questions arising will also be published next Friday, and the parties involved can put submissions to this document before October 1.

“That I think is that, is it not Ms Orr?” the Commissioner asked.

Indeed it is. For now, at least.

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16:30 AEST, 21 September 2018

That is that

Ms Orr says final submissions on the natural disaster case studies are complex and will be submitted in writing.

A further report containing questions arising will also be published next Friday, and the parties involved can put submissions to this document before October 1.

"That I think is that, is it not Ms Orr?" the Commissioner asks.

Indeed it is.

Check back soon for our daily wrap-up, and further detailed coverage in insuranceNEWS.com.au's Monday bulletin.

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16:07 AEST, 21 September 2018

IAG misconduct

Mr Costello returns to suggest the commission could find Swann Insurance engaged in misconduct by continuing to sell add-on insurance even after it was aware of ASIC's concerns.

It also gave incentives to authorised representatives (ARs) to sell as many add-on policies as possible with no regard to the suitability of those products.

It also had no proper oversight of its ARs.

The commission is open to find that one of the reasons for this behaviour is Swann's culture of pursuing profit above the interests of its customers.

IAG failed to have proper oversight of its subsidiary Swann, Mr Costello said.

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16:04 AEST, 21 September 2018

Allianz culture

Ms Orr says that Allianz's culture does not consider risk and compliance a priority, and responds in a defensive way when challenged.

The commission could find that this is one of the reasons for the alleged misconduct.

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15:49 AEST, 21 September 2018

Allianz misconduct

It is open to the commission to find that Allianz engaged in misconduct in relation to each of the misleading statements that were allowed to remain on its website, Ms Orr says.

Contravention of obligations in the Corporations Act by failing to report that misleading and deceptive conduct to ASIC could also have amounted to misconduct.

It also failed to have an adequate compliance system in place.

Ms Orr highlights a number of ways that Allianz engaged in behaviour falling below community standards, including by seeking to "manipulate" independent reports.

She says "for many years" Allianz has had inadequate processes for monitoring content on its own website, and inadequate processes for monitoring compliance incidents.

Ms Orr says monitoring and supervision "remains an issue" at Allianz.

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15:44 AEST, 21 September 2018

Allianz recap

Ms Orr returns to recap the general insurance case studies.

She is reminding the commission of the misleading material that remained on Allianz's website from 2012-2018, and the insurer's compliance culture issues.

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15:39 AEST, 21 September 2018

AMP misconduct

It is open for the commission to find that AMP engaged in misconduct by continuing to deduct premiums from deceased members' accounts, Mr Costello says.

AMP also failed to properly notify ASIC and APRA of the continued deduction of premiums from deceased members from at least 2016.

AMP's culture and systems could be to blame, Mr Costello says.

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15:24 AEST, 21 September 2018

REST misconduct

Counsel Assisting Mark Costello returns to recap the group life case studies.

He says it is open to the commission to find that REST engaged in misconduct by deducting premiums from members no longer covered by insurance.

In relation to a paraplegic member, it may also have engaged in misconduct by failing to do everything in its power to gain a benefit for a member with a claim that has a reasonable chance of success.

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15:01 AEST, 21 September 2018

TAL 'did not respect FOS'

TAL also had a culture that showed "inadequate respect" for FOS, Ms Orr says.

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14:52 AEST, 21 September 2018

TAL misconduct

The commission is open to find that TAL is guilty of misconduct, Ms Orr says.

The life insurer relied on "excessive use of surveillance" and "bullying tactics" in relation to a mental health claimant.

Ms Orr says TAL may have systematically broken the duty of utmost good faith by routinely seeking medical information beyond the claimed condition, in an effort to void the claim on the basis of non-disclosure.

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14:25 AEST, 21 September 2018

CommInsure withheld report from FOS

The commission could find that CommInsure's conduct amounted to misconduct, Ms Orr says.

It withheld a medical report from FOS in relation to a heart attack claim, and was not open and transparent, she says.

Ms Orr says CommInsure showed "a troubling lack of respect" for FOS.

When insurance companies fail to be open and transparent with FOS it undermines its effectiveness, she says.

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14:07 AEST, 21 September 2018

Freedom misconduct down to culture

Ms Orr says Freedom may have engaged in misconduct and unconscionable conduct, and may have broken the law on multiple occasions.

She says it is open to the commission to find that this could be attributed to its culture and remuneration practices.

She says Freedom had "heavy-handed" retention strategies, a "highly aggressive" sales culture, and inadequate disciplinary procedures.

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13:00 AEST, 21 September 2018

Commission breaks for lunch

The royal commission breaks for lunch with Ms Orr to deliver the findings on Freedom Insurance when the hearing resumes at 2pm.

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12:45 AEST, 21 September 2018

ClearView summary

ClearView's testimony had shown it had acted in ways that fell below community expectations and on the evidence it was open to the commission to make a finding of misconduct, Ms Orr says.

The company had highlighted failings in its culture and governance, risk management and renumeration practices, she says.

It had breached anti-hawking rules, engaged in unconscionable conduct, breached its duty to act in good faith and not provided financial services efficiently, honestly and fairly, according to the summary.

Representatives were not adequately trained to ensure they met financial services obligations and the company had not adequately handled conflicts of interests, Ms Orr says.

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12:33 AEST, 21 September 2018

Summing up

Ms Orr has returned to sum up the findings from the past two weeks of evidence provided in life and general insurance case studies.

The summary will "identify the findings that we regard as being open on the evidence",  Ms Orr says.

A document will be published next Friday that will highlight questions arising from the case studies and other evidence tendered to the commission.

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12:11 AEST, 21 September 2018

FSC evidence completed

FSC’s Ms Loane is asked what life insurers expect from advisers in return for the $6 billion in commissions that they paid out over the past five years.

“I really couldn’t say with certainty,” she says.

Ms Orr talks about the scaling down of the cap on upfront commissions, which is set to drop to 60% in 2020 and asks whether there is a case for removing them altogether to prevent conflicts of interest.

Ms Loane says it has been thought that people have to be persuaded to purchase life insurance and as a result there is also a need to incentivise sales.

The FSC has yet to form a view on the level of commissions after 2020 and whether they should be entirely phased out, she says.

“That is a view that various people have had, including in the FSC,” she says.

Ms Orr suggests that the commissions ultimately lead to increased costs for consumers in the form of higher premiums.

“I couldn’t say,” Ms Loane says.

The commission highlights that so far there have been no sanctions applied under the life insurance code of practice, which was introduced in 2016.

The FSC is considering seeking ASIC approval for the next iteration of the code, Ms Loane says.

Ms Orr has completed her questioning and will shortly begin a closing statement.

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11:45 AEST, 21 September 2018

FSC on new code

The FSC is against removing the claims handling exclusion from financial services, while it assesses progress under the life code of practice, CEO Sally Loane says.

Ms Loane says ending the exemption could mean claims assessors would be viewed as giving personal advice, and lead to new training and other requirements, and the change could be like “using a sledge-hammer to crack a nut”.

The current version of the code, and particularly a proposed new version, aims to address the issues, she says.

“We would like to see if that code is producing those better outcomes. The code is quite new,” she says.

The next version of the code will also aim to stop the type of direct sales approaches that had been highlighted by evidence given to the royal commission, Ms Loane says.

The FSC is also reviewing information from ASIC, which had highlighted high lapse rates and continuing high-pressure tactics.

The next version will extend to distributors of life insurance, she says, after Ms Orr highlights the current iteration does not apply to companies such as Freedom Insurance.

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11:00 AEST, 21 September 2018

Code compliance sanctions

Ms Orr highlights that there have been no sanctions imposed by the Code Governance Committee (CGC) since those powers were introduced in July 2014 despite a rising number of breaches reported.

Mr Whelan says sanctions have not been applied because problems have been subsequently fixed without the penalties being required.

“The sanction powers are predicated on the fact that those breaches have not been remedied," he says.

The rising number of breaches also reflects the fact that the code is being taken more seriously and there has been an increase in the compliance mentality within companies.

Ms Orr argues that there could be a role to have sanctions, that act as a denunciation, in addition to having them available if problems are not resolved.

“It may be a discussion that the CGC could bring to us,”  Mr Whelan says.

“There is the argument that the potential of a sanction can act as a deterrent.”

Mr Whelan says many breaches are around failures to meet timeframes through the insurance process.

“They are things that can be corrected through process change and training.”

The commission heard there had been 33 cases where the committee had determined breaches and a further 689 cases where code subscribers had admitted breaches since mid 2014.

Mr Whelan says the ICA doesn't support including the code in contracts, as exists in banking.

Earlier, he told the commission he was open to an end to the claims handling exclusion relating to financial services.

Ms Orr says she has no further questions for Mr Whelan and the next witness will be Financial Services Council CEO Sally Loane.

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10:20 AEST, 21 September 2018

Unfair contract terms

Commissioner Hayne challenges Mr Whelan on why insurance is different when it comes to unfair contract terms.

Mr Whelan says if insurers can't be certain about the extent of a risk they are undertaking "it is very difficult to price that risk".

“There are terms within the contract which should not be challengeable because they define the risk being undertaken," he says.

He warns that levels of uncertainty could be introduced that may be unacceptable to insurers and reinsurers and he would be concerned if changes were introduced that led to a need to rewrite or reprice products, or withdraw from some markets.

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09:44 AEST, 21 September 2018

Mr Whelan says new code to address failures

Mr Whelan says the add-on experience shows that self-regulation has limitations, but the industry is under no illusion it needs to take a more rigorous approach.

Ms Orr suggests that general insurance faces less "black letter" regulation compared to other financial products.

"We have always had the view the industry is heavily regulated," Mr Whelan says, disagreeing with the proposition and noting strong oversight from ASIC and APRA in particular.

Mr Whelan says all regulation has limitations and a co-regulatory approach between industry and other bodies works best.

The ICA also faces criticism over code failures in monitoring distributors.

Mr Whelan says the new code clarifies that third parties selling products are subject to the standards of the code, although previously "it was open to the industry to be able to apply those provisions".

Ms Orr questions why a new code will make a difference, if the previous code had been ignored in the case of add-on sales.

"I think it has been a salutory lesson for the industry," he says. "Clearly there have been failures, and there is no excuse for these sorts of failures."

The ICA is reinforcing and strengthening provisions to build higher levels of service and more accountability, he says.

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09:34 AEST, 21 September 2018

Deferred sales model

Ms Orr questions ICA's Mr Whelan over the group's slow response to problems in the add-on insurance area.

But Mr Whelan says the ICA is a member-based group and there are limitations on the actions it can take.

“We are not a regulator,” he says.

He goes on to discuss the proposal to cap commissions, which was rejected by the ACCC, and the later proposal for a deferred sales model.

The principle is that it will allow customers to make an informed decision, he says. It should increase loss ratios as people will buy products on which they are able to claim.

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09:24 AEST, 21 September 2018

Whelan on add-on insurance

Ms Orr questions Mr Whelan about the poor performance of add-on insurance, that people have been pressured into sales, they have represented poor value and commissions paid out were higher than benefits received by consumers.

“Is any of that acceptable Mr Whelan,” Ms Orr asks.

“Not at all,” he says.

Ms Orr also asks what this says about the culture of the general insurance industry.

Mr Whelan notes that the Insurance Council and members, along with ASIC, have taken steps to improve the outcomes.

Ms Orr suggests that there is a culture of making money ahead of meeting the needs of consumers and there was a lack of oversight of intermediaries.

Mr Whelan acknowledges the problem in the case of add-on insurance sales through caryards.

“There was an issue as to how those intermediaries were trained and monitored,” he says.

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09:15 AEST, 21 September 2018

Questions on code

Mr Whelan is questioned about the general insurance code of practice, and new measures to be introduced in the next version.

Ms Orr highlights that the self-regulatory code was first introduced in 1994 after successful lobbying by the industry against government proposals for a compulsory code.

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08:50 AEST, 21 September 2018

Royal commission Friday

The royal commission gets away to an early start today with the hearings commencing at 9am as the focus shifts to regulation.

Insurance Council of Australia CEO Rob Whelan is the first scheduled witness while Financial Services Council CEO Sally Loane will take the stand later in the day.

Today’s evidence will conclude Round 6 of the hearings. The commission will hold its next round from November 19-30, focusing on policy questions raised to date in the inquiry.

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17:02 AEST, 20 September 2018

THURSDAY’S SUMMARY: Suncorp 'put vulnerable family at risk'

THURSDAY’S SUMMARY: Suncorp 'put vulnerable family at risk’

Suncorp was full of apologies at the Hayne royal commission today, after leaving a vulnerable family in an unsafe property and trying to fob them off with a cash settlement way below their proper entitlement.

Worryingly for Suncorp, the sorry saga is unlikely to be a one-off. The commission heard that in 2016 the Financial Ombudsman Service (FOS) determined Suncorp had “definite systemic issues” with complaints handling, claims handling and responding to FOS determinations.

Bernadette Heald, whose home in NSW’s Hunter Valley was damaged in a severe storm in April 2015, told the commission she was insured with Suncorp and filed a claim by telephone the day after the storm.

A Suncorp-appointed engineer recommended repairs and a $30,000 cash settlement was offered.

Ms Heald said the family did not accept this, as they believed the house was damaged beyond repair, and in fact was unsafe to live in.

Ms Heald’s children were vulnerable - her son has a heart condition and her daughter suffers from anxiety.

She struggled to contain her emotion as she described trying to reassure her daughter as bricks began cracking around them. She said she “begged” Suncorp to move them to temporary accommodation, but this did not happen for many months.

The Healds complained to Suncorp about their treatment and insisted on another engineers’ report, which found the house was “slowly disintegrating”.

They received an apology for the handling of the claim but the cash settlement offer remained, and the family took a complaint to FOS.

Eventually FOS determined that the house did require a complete rebuild, and that Suncorp should pay the Healds $744,000. The family is still in temporary accommodation and their home will not be finished until next year.

Ms Heald says Suncorp knew she was in an unsafe house with two special needs children, and this was allowed to continue for two and a half years.

“It was really tough,” she said.

“We had home and contents insurance like you’re supposed to. You’re entitled to have a safe house and that's what you have insurance for.”

Suncorp CEO Insurance Gary Dransfield had the unenviable job of accepting responsibility for the errors and attempting to explain what went wrong.

He sincerely apologised to the Healds, and says the company has learnt many lessons. He said total replacement was rare following this storm, and that the insurer got into “an entrenched position” that it found it hard to dig itself out of.

He accepted that in regards to this claim Suncorp breached the General Insurance Code of Practice in several areas. He also agreed that Suncorp was aware of Ms Heald’s children’s health concerns “from an early stage” in the claim.

Earlier in the day, Mr Dransfield was quizzed over cash settlements offered to Wye River claimants after the bushfires of December 2015.

Counsel Assisting Rowena Orr suggested customers were “pressured” into accepting settlements and said advertising about total replacement policies was misleading.

Suncorp had sent renewal notices to people whose homes had been destroyed in the fires, the commission heard.

“It was not appropriate and we should not have done that,” Mr Dransfield said, agreeing that it was conduct that fell below levels the community would expect.

Ms Orr raised a concern that ASIC is hindered in taking action over claims handling, due to an exemption in the financial services definition, and says there are moves to consider whether there should be changes.

The commission returns at 9am tomorrow, as does our special insuranceNEWS.com.au blog.

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16:29 AEST, 20 September 2018

Dransfield finishes evidence

We learn that FOS found in 2016 that Suncorp had "definite systemic issues" in three areas - complaints handling, claims handling and implementing FOS determinations.

That's Mr Dransfield's evidence finished, and the hearing is over for today, back at 9am tomorrow. Check back soon for our daily wrap-up story.

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15:53 AEST, 20 September 2018

Suncorp breached code

Mr Dransfield accepts that in regards to this claim Suncorp breached the General Insurance Code of Practice in several areas.

He also accepts the Healds were right to disagree with the findings of Suncorp's engineers, and that the reports provided by engineers selected by the Healds were better.

He says that many improvements have been made as a result of reviewing the Healds' claim.

He says he is sorry that a customer had to go through something like this, in order for the company to learn from it.

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15:42 AEST, 20 September 2018

FOS finds in family's failure

The Healds rejected that offer, and put in a counter-offer of more than $748,000, which Suncorp rejected.

The matter returned to FOS as the parties could not agree.

FOS determined in January this year that Suncorp should pay $744,000.

Mr Costello suggests the failure to settle the matter promptly dragged the matter out for an extra year and added to the stress of the Heald family.

Mr Dransfield agrees.

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15:36 AEST, 20 September 2018

Suncorp delays after FOS determination

Mr Costello says FOS determined on January 11 2017 that the house should be rebuilt.

Suncorp accepted that, but decided to negotiate the amount of a cash settlement.

It needed to get a new scope of works carried out, which took more than three months.

Internal communication shows Suncorp staff complaining of having to "dodge" FOS during this time.

Mr Dransfield accepts that the delay was not acceptable.

In May an offer is finally made of more than $605,000.

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15:16 AEST, 20 September 2018

Suncorp aware of health problems

Mr Costello says Suncorp was aware of Ms Heald's children's health difficulties "from an early stage" of the claim.

Mr Dransfield agrees. He says the insurer is much better at recognising the vulnerabilities of customers now, and responding appropriately.

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14:44 AEST, 20 September 2018

Suncorp apologises to family

Mr Dransfield returns to the witness box to be questioned by Counsel Assisting Mark Costello on the Heald claim.

Mr Dransfield apologises sincerely to the Heald family.

He says total replacement was rare following this storm, and that the insurer got into "an entrenched position" that it found it hard to dig itself out of.

He also accepts too many different people were involved in the claim.

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14:39 AEST, 20 September 2018

FOS determined settlement

FOS finally determined that the house needed to be rebuilt and the family should be paid $744,000.

Ms Heald's family is still in temporary accommodation now, and the house should be rebuilt by early next year.

Ms Heald says she had never had "so many roadblocks".

She says Suncorp knew she was in an unsafe house with two special needs children, and this was allowed to continue for two and a half years.

Her son has a heart condition and her daughter suffers from anxiety.

"It was really tough," she said.

"We had home and contents insurance like you're supposed to. You're entitled to have a safe house and that's what you have insurance for."

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14:25 AEST, 20 September 2018

Suncorp refused to move family out

Ms Heald says she begged Suncorp to move the family out.

She says at night time you could hear the house moving about.

"We were so concerned about our safety."

In April the family moved into a neighbour's house and Suncorp gave them $400 a week for rent.

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14:18 AEST, 20 September 2018

Suncorp keen to cash settle

A quote of $30,000 was given for repairs and Suncorp wanted to cash settle.

Ms Heald says the family rejected that as they were concerned the cost could be more.

Suncorp's response to an official complaint included an acceptance that the claim had been handled badly, but the offer did not change.

Ms Heald then lodged a complaint with the Financial Ombudsman Service (FOS).

Suncorp offered $1000 compensation but the family rejected it.

The next day Suncorp offered $3000, which the family accepted, but they still declined the cash settlement and continued with the FOS complaint.

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14:13 AEST, 20 September 2018

Complaints over Suncorp communication

Ms Heald says they were not happy with an engineer's report and requested another one.

Suncorp eventually agreed to send a second engineer, in early August.

Ms Heald says the engineer was concerned that there was structural damage and that it had been caused by the storm.

Ms Heald says the engineer said the house was "slowly disintegrating".

The family considered moving out but they had no family close by and could not afford rent on top of the mortgage.

Ms Heald says her husband had put a complaint to Suncorp but that it was frustrating trying to speak to people at the insurer.

She said "you get a different person every time" and were often on hold for hours.

"We got no answers," she said

 

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14:04 AEST, 20 September 2018

Mother gives evidence of storm claim

We are hearing from Bernadette Heald, whose home in NSW's Hunter Valley was damaged in a severe storm in April 2015.

She was insured with Suncorp and filed a claim by telephone the day after the storm.

A building inspector did not attend until the next month.

There was structural damage and the Heald's were concerned for their safety, as some bricks were cracking.

Ms Heald says her daughter suffers from anxiety and became distressed. She struggled to contain her emotion as she described trying to reassure her daughter when "did not know herself" if the house was safe.

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13:06 AEST, 20 September 2018

Replacement cover penalties

Suncorp fines over the misleading complete replacement cover advertising amounted to a tiny fraction of the $426 million annual premium income received from the products, the commission hears.

Commissioner Kenneth Hayne suggests the fine could be considered “a very low cost of doing business”.

ASIC issued four infringement notices, each for $10,800 relating to the advertising. The penalties covered radio and online ads first flagged as a concern and also for a new television advertisement released early last year.

Ms Orr questioned Mr Dransfield over the company’s decision to pay the penalty, when it believed it had done nothing wrong, rather than go to court. Maximum penalties in that case could have been $1.8 million for each contravention.

Ms Orr says that in paying the small infringement the balance of commercial risks and rewards in this situation had paid off for the insurer.

“The reputational impact is significant, irrespective of the fine,” Mr Dransfield says.

The commission has taken a break for lunch.

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12:36 AEST, 20 September 2018

Misleading advertising campaign

Suncorp launched a new advertising campaign for its complete replacement cover, even while ASIC was raising concerns it might mislead customers, the commission hears.

Mr Dransfield says there was a belief at that time that the marketing was appropriate and that it was a product that should be promoted.

“I think the business imperative certainly was the driver,” he says.

ASIC was already investigating a previous campaign that had given consumers the impression that the insurer would in all cases repair and rebuild properties no matter what the cost, under the complete replacement cover.

Mr Dransfield agrees that in reality the insurer could choose to cash settle and costs were capped by an assessment of what was reasonable in replacing the previous building.

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12:01 AEST, 20 September 2018

ASIC hamstrung on claims

Ms Orr says there are concerns ASIC is hindered in taking action due to a claims handling exemption in the financial services definition, and there are moves to consider whether there should be changes.

Mr Dransfield says there could be unintended consequences from such a change, such as having discussions with customers on their claim falling within the definition of financial advice.

“It would be unfortunate if we were not able to have an open conversation with a customer on their particular circumstances in lodging that claim,” he says.

Mr Dransfield says he is also “quite open” to the suggestion if it improves consumer outcomes.

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11:48 AEST, 20 September 2018

Improper renewal notices sent

Suncorp had sent renewal notices to people whose homes had been destroyed in the fires, the commission hears.

“It was not appropriate and we should not have done that,” Mr Dransfield says, agreeing that it was conduct that fell below levels the community would expect.

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11:29 AEST, 20 September 2018

Cash settlement issues

Ms Orr is questioning Mr Dransfield over suggestions that Wye River claimants were pressured to accept cash settlements, with concerns raised by the Australian Securities and Investments Commission.

Mr Dransfield says that based on previous bushfire experience, customers affected often preferred cash settlement, but the Wye River population included more holiday and investment properties.

He says there were “still discussions on-going” at the time ASIC raised its concerns.

The issue of significant differences between cash settlement sums offered based on a scope of works and much higher estimates customers received when they sought independent quotes, is also raised.

Mr Dransfield says the cash settlement figures were provisional and there was the potential, due to issues such as storm and waste water management, for final sums to be increased.

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11:11 AEST, 20 September 2018

Suncorp on Wye River

Mr Dransfield says the company could have communicated better with Wye River claimants after the bushfires of December 2015.

But he says external factors were the cause of delays in handling claims with complete replacement.

“They were moving at a pace I would have expected given the circumstances there,” he says.

By April, of 60 claims lodged under AAI home insurance, only 13 were finalised while 47 remained active.

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10:37 AEST, 20 September 2018

Suncorp on the stand

Suncorp Insurance CEO Gary Dransfield is taking the stand. Counsel Assisting Rowena Orr continues.

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10:19 AEST, 20 September 2018

Youi productivity targets

Ms Orr suggests that Youi’s productivity targets, which were weighted toward the lodgement of new claims, had affected the handling of matters already accepted.

The commission hears concerns were raised that staff were over-worked as they handled increasing volumes of claims and were frustrated over processes involved and not having sufficient time.

Mr Storey said the area has this year been restructured to separate duties related to lodging claims and managing claims.

“This is quite a large change for our claims department,” he says.

Mr Storey says the company has apologised to the Suttons, who by early this year had been $8,525 out of pocket as a result of the delays handling their accommodation costs.

Ms Orr has completed her questioning of Mr Storey.

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09:55 AEST, 20 September 2018

Youi South Africa delays

The handling of claims through Youi’s South African office had led to delays in reimbursing Airlie Beach resident Glen Sutton for temporary accommodation costs in the wake of Cyclone Debbie, the commission hears.

Delays in making payments to Mr Sutton, who was in financial distress, were “not acceptable”, Mr Storey tells the commission.

Problems occurred in May and then were subsequently repeated, until the insured was thousands of dollars out of pocket. Correct processes were not followed initially as approval was unnecessarily sought for payment from a loss assessor.

“We missed multiple opportunities to get this right,” Mr Storey says.

Changes were made in August last year so that a similar case would be handled locally, but the process was not changed retrospectively, Mr Storey says.

Mr Storey also says Youi has this year introduced a review mechanism so claims over six months of age are reviewed at least monthly. He says a complaints manager position has also been introduced.

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09:21 AEST, 20 September 2018

Royal commission Thursday

The royal commission kicks off again at 9:30am with Youi’s COO Claims Services Jason Storey facing further scrutiny for the insurer’s response to customer claims.

Suncorp Insurance CEO Gary Dransfield will be questioned over claims handling following the Wye River region bushfires in December 2015, while the company also faces scrutiny over a case study relating to flooding during an intense east coast low.

Evidence will be heard from Bernadette Heald who made a claim following the floods with AAI.

Insurance Council of Australia CEO Robert Whelan is scheduled to take the stand later in the day, time permitting.

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16:53 AEST, 19 September 2018

WENESDAY’S SUMMARY: Youi’s post-disaster claims disasters

WEDNESDAY’S SUMMARY: Youi’s post-disaster claims disasters

Youi’s deficient claims-handling after natural catastrophes was laid bare at the Hayne royal commission today.

Two of the insurer’s customers detailed a disastrous series of events that left them vulnerable and exposed.

Repairs to the claimants’ properties were botched, with incompetent builders used and complaints brushed off as “over-dramatising”.

COO Claims Services Jason Storey admitted that in both cases Youi failed to comply with the General Insurance Code of Practice, as well as the duty to act with “utmost good faith”.

He also confirmed that an internal review of Youi’s complaints process found it to be non-compliant and requiring significant improvement.

Customer Sacha Murphy took to the witness box to highlight problems she had getting her Broken Hill home repaired after it was damaged in a severe hailstorm in 2016.

The family was left with an exposed roof, no air-conditioning and a range of other problems.

The commission heard that Youi appointed a builder who had been the subject of a number of previous complaints. In fact, Youi had suspended the builder from its approved panel but still allowed him to continue with the job at Ms Murphy’s property.

Counsel Assisting, Rowena Orr, said Youi’s agreement with the builder required him to start work within 10 days of the scope of works being signed and the excess being received. However, the builder did not start work for another four months.

Ms Orr asked what Youi did during this delay.

“I don't think Youi did enough, Ms Orr,” Mr Storey said.

Youi also failed to address concerns that Ms Murphy and her family were exposed to potential lead contamination, Ms Orr says.

Ms Murphy flagged on October 6 that her roof was open and that she was pregnant and could be exposed to lead dust, a recognised issue in Broken Hill.

Nothing was done until October 9. Ms Murphy’s family was moved to temporary accommodation for four nights, but on return the roof was still not fixed.

Ms Murphy sent a detailed six-page complaint letter to Youi but the insurer's response was inadequate, Ms Orr said.

She said the roof was finally repaired in May this year - 18 months after the damage was caused. A different builder was used to carry out the repairs.

Youi also came under fire for its handling of damage to a home in Airlie Beach in Queensland after Cyclone Debbie in March last year.

Glen Sutton says he and his wife felt bullied and intimated during the process, initial make-safe works were totally inadequate, the repair process was terrible and handling of temporary accommodation also atrocious.

He said a tarpaulin was not immediately put over the roof after the cyclone and the covering eventually put in place was inadequate and allowed water to flood into the house, causing further problems.

“The moment you walked in to the house you could smell mould,” he said.

An initial scope of work report was inadequate, causing Mr Sutton to insist on an engineers report that recommended total replacement of the roof.

Mr Sutton says he is still not back in the home, and “there is no timeframe” for when that might be possible.

“It has been mishandled from the beginning,” he said. “It is an absolute shambles.”

Internal Youi emails revealed a loss assessor accused the Suttons of “over-dramatising” in order to gain more than they were entitled to.

Mr Storey accepted such language about an insured was not appropriate.

He says a chief customer officer has recently been appointed and his “first priority” will be to address the findings of the review into the complaints process.

Earlier in the day, IAG’s EGM Business Distribution and Group Executive Ben Bessell was quizzed over the sale of add-on insurance for vehicles.

Counsel Assisting, Mark Costello, put Mr Bessell under pressure over IAG-owned Swann Insurance’s oversight of authorised representatives selling add-on products through motor dealerships.

Mr Bessell accepted the oversight process provided a “light touch”, there had been a lack of face-to-face audits and that Swann could not be certain that ARs were following correct procedures in their dealings with customers.

Mr Bessell says Swann has halted the sale of the add-on products through dealerships due to the issues in the market and as the group focuses on its “customer-centric” approach.

Swann expects to complete its remediation payments to consumers by January 31 next year. It is currently about halfway through the process.

The hearings resume at 9.30am tomorrow morning, and insuranceNEWS.com.au will continue to keep you informed via our live blog.

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16:26 AEST, 19 September 2018

Commission finished for the day

That's it until 9.30am tomorrow. Check back soon for our daily wrap story.

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16:14 AEST, 19 September 2018

Insured accused of 'overdramatising'

A loss assessor accused the Suttons of "overdramatising" in order to gain more than they were entitled to, Ms Orr says.

Internal Youi emails revealed the language which Mr Storey accepted was not appropriate.

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15:51 AEST, 19 September 2018

Suttons not treated fairly

Now we move to the case of the Suttons in Airlie Beach, whose house was damaged by Cyclone Debbie.

Mr and Mrs Sutton are still not back in their property.

Mr Storey again accepts that the handling of the claim breached the General Insurance Code of Practice, and failed in the duty of utmost good faith.

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15:49 AEST, 19 September 2018

Roof repaired 18 months late

Ms Orr says the roof was finally repaired in May this year - 18 months after the damage was caused.

A different builder was used to carry out the repairs.

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15:40 AEST, 19 September 2018

Youi complaints process 'not compliant'

Youi has carried out a review of its complaints process and found it to be "non-compliant".

Significant improvement is required, the review found.

Mr Storey says a Chief Customer Officer has been appointed and his "first priority" will be to address the review's findings.

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15:34 AEST, 19 September 2018

Complaint not dealt with by Youi

Ms Murphy sent a detailed six-page complaint letter to Youi but the insurer's response was inadequate, Ms Orr says.

Mr Storey says a Youi member of staff called Ms Murphy from a mobile phone, but there is no recording of this call.

Ms Orr asks whether Youi complied with the General Insurance Code of Practice with regards to the handling of Ms Murphy's complaint.

Mr Storey says not.

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15:17 AEST, 19 September 2018

Youi failed to respond to complaints

Youi failed to address concerns that Ms Murphy and her family were exposed to potential lead contamination, Ms Orr says.

Ms Murphy flagged on October 6 that her roof was open, and that she was pregnant and could be exposed to the lead dust.

Ms Orr says nothing was done until October 9.

Ms Murphy's family was moved to temporary accommodation for four nights, but on return the roof was still not fixed.

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14:56 AEST, 19 September 2018

Builder took four months to start repairs

Ms Orr says under Youi's agreement with it, the builder was required to start work within 10 days of the scope of works being signed and the excess being received.

However the builder did not start work for another four months.

Ms Orr asked what Youi did during this delay.

"I don't think Youi did enough, Ms Orr," Mr Storey said.

Mr Storey accepts that Youi failed to handle Ms Murphy's claim in a timely manner, in accordance with the General Insurance Code of Practice.

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