In a statement, ASIC said CommInsure had trauma policies with medical definitions that were out of date with prevailing medical practice, specifically for heart attack and severe rheumatoid arthritis.
However, this was not against the law, because the law allows an insurer to set out the level of cover its policy provides, including out of date medical definitions as long as these are clearly disclosed in the policy, the statement said.
“Insurers can sell consumers policies which already have outdated medical definitions,” ASIC said.
“Although this is not against the law, it is clearly out of step with community expectations, given that consumers cannot be expected to know whether a medical definition is already outdated when they purchase life insurance.”
ASIC also noted that, as life insurance is a long-term product, a consumer can end up with a life insurance policy where previously current medical definitions have become out of date over time.
“This occurs because life insurers are legally required to maintain a consumer's cover, and cannot easily update a policy or change its terms,” ASIC said.
“While this is an important consumer protection, it creates a 'legacy products' issue in the life insurance industry.
“The government is considering this industry-wide issue further in response to a recommendation of the Financial System Inquiry.”
ASIC said it found no evidence to support allegations that CommInsure claims managers applied undue pressure on doctors to change or alter their medical opinions.
However, there were a number of areas where CommInsure needs to make improvements to its claims handling processes. These improvements, which were also identified by Deloitte, include better and more timely communications with consumers as well as enhanced training and assistance for claims managers.
“ASIC will work with CommInsure to make sure these improvements are implemented as quickly as possible,” the statement said.
“ASIC has requested CommInsure to undergo a further implementation review by an independent expert in mid-2018, to test the effectiveness of the changes, and provide additional assurance that CommInsure is making the necessary improvements to its business. CommInsure has agreed to this request."
Further, ASIC said it is continuing to investigate concerns that CommInsure's advertising and promotion of life insurance policies to consumers contained potentially misleading or deceptive information in the period before March 2016.
“We will provide a further update on this aspect of our investigation when appropriate,” the statement said.
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