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and rectifying the root causes of miscalculations, including complex product rules, inadequate staff training, outdated technology systems, ineffective controls, and lack of monitoring.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 She reached out to the insurance company and found out that the error was due to an outdated system that failed to apply the correct consumer price indexation to her policy benefits.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
|AFCA Criticizes Insurance Industry Over Delayed Dispute Resolution|
20 Mar 2023: .financialservicesonline.com.au
The Australian Financial Complaints Authority (AFCA) has expressed its deep concern on the rising complaint numbers and poor industry response, leading to significant dispute resolution delays. The CEO and Chief Ombudsman, David Locke, warned that complaint numbers could reach 100,000 in the current financial year, an increase from 72,358 in the previous year. The surge in complaint numbers resulted from natural catastrophes, complaints about claims handling and an increase in banking sector-related scams. - read more
|The Importance of Weather-Related Insurance Coverage for Australian Homeowners|
20 Mar 2023: .financialservicesonline.com.au
As the weather in southern Australia continues to be a hot topic, homeowners are reminded of the importance of reviewing their insurance coverage. With bushfire warnings being issued due to extreme heat and wind, it's crucial to ensure that your insurance coverage includes weather-related risks. - read more
|Cyber Liability Insurance: A Must-Have for SMEs in the Digital Age.|
16 Mar 2023: .financialservicesonline.com.au
Small and medium-sized enterprises (SMEs) in Australia should take cyber liability insurance more seriously, according to Jane Mason, head of product, channels and risk at insurance brokerage and consultancy BizCover. Cybercrime incidents in Australia are on the rise, occurring every seven minutes on average during FY22, one minute faster than the previous year. - read more
|Life insurance industry hit hard by $6.6 billion investment losses|
10 Mar 2023: .financialservicesonline.com.au
The Australian Prudential Regulation Authority (APRA) has released its latest industry update, revealing a significant slump in net profit after tax for the life industry in Australia. The industry suffered a 59.3% decrease in net profit after tax to $500 million for the year ending December, primarily due to investment losses of approximately $6.6 billion. - read more
|Strengthening Cyber Security: A Fundamental Priority for Australia|
07 Mar 2023: .financialservicesonline.com.au
The Australian Government is currently soliciting feedback until mid-April for the creation of a 2023-2030 Australian Cyber Security Strategy. The move comes after a roundtable discussion led by Prime Minister Anthony Albanese, who aims to make Australia “the most cyber secure nation.” - read more
|DIY Review Checklist for your Income Protection Insurance|
If you have an income protection insurance plan already - or are thinking about buying one, then you need to be aware that these policies require regular maintenance and careful scrutiny to ensure that they adequately meet your needs. Unfortunately, many people purchase income protection insurance policies only to find out about their shortcomings at claim time. - read more
|The importance of Income Protection Insurance for Employees|
While some people might think that income protection insurance is only for self-employed individuals, this is not accurate. This type of insurance is just as beneficial for employees, because accidents and illnesses can happen to anyone at any time. Workers' compensation provides only limited coverage, and most employees don't have much more than a few weeks' sick leave accrued. Of course, if you have more than one job, the situation becomes more of a concern if you are injured at one workplace resulting in being unable to work at either. - read more
|Income protection insurance|
It's trite but true to say that, for most people, their most valuable asset is their ability to earn an income. But how relevant is income insurance to most Australians? - read more
|Loss of income insurance: Case Study |
Rebecca is a single, self-employed graphic designer who works from home. Aged in her mid-30s, she has monthly commitments of a mortgage and car payments and the usual living expenses. - read more
|Life Insurance: How much is enough? |
When considering life insurance, you're planning and preparing for an event that most of us would rather not think about. But life insurance represents a critical step in managing your personal finances and ensuring your family's well-being. - read more