Life Insurers Under Scrutiny: The Consequences of Failing to Meet Obligations
Life Insurers Under Scrutiny: The Consequences of Failing to Meet Obligations
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
The regulation of insurance claims handling and settling as a financial service under the Corporations Act 2001 in Australia has far-reaching implications for both consumers and life insurers.
As per the Australian Securities and Investments Commission (ASIC), the handling of claims must be done efficiently, honestly, and fairly, and any breaches in these obligations can result in severe consequences for life insurers.
For consumers, this regulation ensures that they receive accurate and fair payments in case of a claim. The miscalculation of policy benefits can lead to significant financial losses for the policyholder, and this regulation ensures that life insurers are held accountable for their actions. Additionally, the ASIC's call for life insurers to review their systems and controls for claims calculations and payments gives consumers peace of mind that the insurance company they trust is adhering to the highest standards of practice.
Life insurers, on the other hand, must take the necessary steps to ensure that their claims calculation and payment processes are accurate and in line with the regulations set forth by ASIC. This may involve examining and rectifying the root causes of miscalculations, including complex product rules, inadequate staff training, outdated technology systems, ineffective controls, and lack of monitoring. The seven life insurers who have been reported for breaches have taken steps to implement system fixes and customer remediation programs, but all life insurers must be proactive in ensuring their processes are in line with the regulations.
Here are some examples to illustrate the potential consequences of miscalculations and the steps that could be taken to resolve the issue:
Mrs. Smith had taken out a life insurance policy on her husband's life with a prominent insurer. Upon filing a claim following her husband's passing, she was shocked to learn that her policy benefits had been miscalculated, leading to a significant underpayment of her claim. She reached out to the insurance company and found out that the error was due to an outdated system that failed to apply the correct consumer price indexation to her policy benefits. Mrs. Smith was able to resolve the issue by working with the life insurer to complete a customer remediation program.
Mr. Johnson had an income protection policy with a different life insurer. Upon filing a claim, he learned that his policy benefits had been miscalculated, leading to an overpayment of his claim. The error was due to inadequate staff training on the manual processes for assessing and calculating income protection benefits. Mr. Johnson was able to resolve the issue by working with the life insurer to help identify and rectify the training issues and ensure accurate calculation of benefits going forward.
In both of these examples, the customers were able to resolve the issue by working with their life insurers and taking advantage of the customer remediation programs offered by the insurers. This highlights the importance of being aware of the terms of your insurance policy and of the steps that can be taken to resolve any issues that may arise. It's also essential to choose a reputable and trustworthy insurance company that adheres to the regulations set forth by ASIC and takes the necessary steps to ensure accurate and fair claims calculation and payment.
So, the regulation of insurance claims handling and settling as a financial service under the Corporations Act 2001 serves to protect the rights and interests of Australian consumers while holding life insurers accountable for their actions. It is essential for both consumers and life insurers to be aware of these obligations and take the necessary steps to ensure accurate and fair claims calculation and payment. Failing to meet these obligations can result in severe consequences, including financial penalties, legal action, and reputational damage.
Published:Thursday, 2nd Feb 2023 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
QBE Insurance Group, a prominent player in the Australian insurance sector, has recently experienced a notable decline in its share value, reaching a seven-month low. This downturn is primarily attributed to a slowdown in the company's premium rate growth during the third quarter of the 2025 fiscal year. - read more
The Australian Competition and Consumer Commission (ACCC) has recently voiced concerns regarding Insurance Australia Group's (IAG) proposed acquisition of the Royal Automobile Club of Western Australia's (RAC) insurance business. Valued at A$1.35 billion, this deal aims to expand IAG's footprint in Western Australia. However, the ACCC warns that such consolidation could diminish competition in the state's motor and home insurance markets, potentially leading to higher premiums and reduced service quality for consumers. - read more
QBE Insurance Group, Australia's largest insurer by market value, has recently experienced a significant downturn in its share price, reaching a seven-month low. This decline is primarily attributed to a slowdown in the company's premium rate growth during the third quarter of fiscal 2025. For tradespeople across Australia, this development could have notable implications, particularly concerning insurance premiums and coverage options. - read more
The Australian Securities and Investments Commission (ASIC) has recently raised significant concerns regarding the quality of financial advice provided to individuals about self-managed superannuation funds (SMSFs). This development is particularly relevant for tradespeople considering SMSFs as a means to manage their retirement savings. - read more
Australia's financial regulators, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC), have issued a strong warning to the country's A$4.5 trillion superannuation industry. They emphasize the urgent need to prepare for an anticipated influx of approximately 2.5 million retirees over the next decade. This development holds significant implications for tradespeople, many of whom rely on superannuation funds for their retirement savings. - read more
When it comes to life insurance, a pre-existing condition refers to any medical condition or illness that you have been diagnosed with before applying for a life insurance policy. - read more
When you’re young, life is all about new experiences and making plans for a promising future. While factors like travel, career, and relationships often take centre stage, one aspect often overlooked is life insurance. It might seem like something to consider later in life, but starting a policy while you're young can be a savvy financial move. - read more
The digital age has fundamentally transformed how we approach almost every aspect of our lives, including the way we shop for life insurance in Australia. Gone are the days when one had to schedule meetings with insurance agents or flip through pamphlets to understand life insurance policies. Today, obtaining life insurance quotes online has become the norm, offering a hassle-free and incredibly accessible platform for individuals to safeguard their financial future. - read more
Life insurance and estate planning are critical components of financial security. They ensure that your loved ones are protected financially when you are no longer around. By understanding these tools, you can take significant steps to secure your family's future. - read more
Life insurance is a fundamental component of a robust financial plan, yet its significance is often underestimated. It serves as a safety net, ensuring that your loved ones are financially secure in the event of your absence. Understanding life insurance is the first step towards safeguarding your family’s future. - read more
Start Here !
Apply now for your free Insurance assessment and price comparisons!
Knowledgebase
Underwriting: The process by which an insurer determines the risk of insuring a client and decides the terms of coverage.
