Life Insurance update

19 October 2020

Welcome to our update, bringing you the latest in Life Insurance news.

During Life@AILA’s webinar on Tuesday, 13 October 2020, Suzanne Oliver (Senior Legal Counsel at MLC Life Insurance), Jocelyn Furlan (Principal, Furlan Consulting) and Darren Ferrari (Barrister) presented to the industry on the Australian Financial Complaints Authority (AFCA). The webinar touched on AFCA’s history, significant rule changes, AFCA’s decision-making approaches and its Datacube data, as well as the Full Federal Court decision in QSuper Board v Australian Financial Complaints Authority Limited [2020] FCAFC 55.

In this update, we recap some of the highlights of the Life@AILA webinar, identify some of the struggles facing the industry and The Life Code Compliance Committee’s (Life CCC) 2019-20 Annual Report findings on compliance, breaches and achievements.

Life@AILA: Two Years on with AFCA

One of the key focal points of the webinar was AFCA’s decision-making approaches for superannuation and non-superannuation financial complaints. This included an overview of how AFCA decides what is “fair in all the circumstances” according to sections A14.1 and A14.2 of AFCA’s Operational Guidelines to the Rules. These can be accessed here.

For non-superannuation complaints, AFCA must do what it considers is “fair in all the circumstances” having regard to: legal principles; applicable industry codes or guidance; good industry practice; and previous relevant Determinations of AFCA or predecessor schemes.

For superannuation complaints, AFCA must apply the approach specified in s1055 of the Corporations Act, including fair and reasonable in all the circumstances and cannot make determinations contrary to law, insurance policy or governing rules.

Suzanne Oliver considered how AFCA has applied the concept of “fair in all of the circumstances” across two areas of life insurance: claims for critical illness benefits and policy avoidance (or variation) for misrepresentation / non-disclosure.

When it comes to AFCA’s approach to misrepresentation / non-disclosure disputes, review of the published Determinations reveals some familiar considerations when it comes to deciding whether an insurer is entitled to avoid or vary a policy of insurance. Some of these considerations cited by AFCA in the context of “fairness” include the proximity of the symptoms / treatment to the application for cover and the extent of the applicant’s health at the time they applied for cover.  However, other indicia of fairness (or unfairness) recognised by AFCA in the published determinations include matters which insurers have perhaps not traditionally had regard to when deciding such matters strictly in accordance with the law. This has included such matters as whether or not the complainant was an existing customer, the length of time the policy had been in force, and the extent to which the complainant had expert advice at the time of applying for cover or responding to ‘show cause’ correspondence.

QSuper Board v Australian Financial Complaints Authority Limited [2020] FCAFC 55

The Full Federal Court dismissed an appeal by QSuper Board (QSuper) from a Determination of AFCA, which required QSuper to refund premiums to a member of the QSuper fund. The case considered the adequacy of disclosure in a “significant event notice” given under section 1017B of the Corporations Act 2001 (Cth), where the Full Federal Court was tasked with deciding several matters on appeal, including whether AFCA had exercised judicial power. QSuper’s appeal failed and AFCA’s decision to refund insurance premium to the member was substituted for QSuper’s decision. Read the full decision here.

Life Insurance Market Insights and 2020 Financial Results

KPMG released its Life Insurance Insights 2020 report on 8 October 2020 which reported on the Australian life insurance market financial results over the 2020 financial year.

The data analysed by KPMG indicates operational challenges for insurers over the 12 month period prior to 30 June 2020, with premium income, direct premium revenue and group lump sum decreasing over the period. KPMG’s Life

Insurance Insights 2020 report discusses changes in the market, risk product profitability, APRA supervisory adjustments and an outlook for the industry, all of which can be accessed here.

Life CCC’s Annual 2019-20 Report

The Life CCC’s Annual Report released on 30 September 2020 tables data concerning significant breaches and alleged significant breaches of the LICOP. It also outlines the Committee’s views on breach reporting, its oversight of the Code and areas for industry improvement. A summary of insights drawn from the report include:

  1. Claims and complaints handling breaches were the two highest categories of breaches over the 2019-20 period;
  2. Subscribers nominated that most claims-related breaches (under Chapter 8 of the LICOP) related to people related issues, including inadequate staff training, human error and a failure to follow the correct processes and procedures;
  3. The Committee is focussed on monitoring and compliance work breaches relating to Chapter 13 of the LICOP; and
  4. No sanctions were issued by the Committee during the 2019-20 reporting period.

Further details of the Life CCC’s endeavours and actions over 2019-20 period can be found by accessing their report here.

This article was written by Matthew Harding, Partner, Sylvia Quang, Special Counsel, Andrew Gawthorne, Senior Associate and Thomas Dendrinos, Solicitor.

Sylvia Quang

Special Counsel | Sydney

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