Urgent reform needed to prevent insurers unfairly denying claims, says ALA

6th Nov 2018

Insurers must be prevented from unfairly denying claims based on unrelated pre-existing health conditions and restricted from accessing medical records dating back more than five years prior to the policy inception, says the Australian Lawyers Alliance (ALA).

‘The current regime is disproportionately and unfairly tilted in favour of the insurer,” said ALA spokesperson, Mr Josh Mennen. “It permits the insurer to take a sledgehammer to the policy where a scalpel would be more appropriate.”

“Too often we see claims denied by insurers after they have trawled through a claimant’s medical history and found an undisclosed condition in the history of the claimant – possibly a reference to depression or anxiety that was resolved before the insurance policy was taken out.

“Currently the insurer is able to deny the claim by stating that the policy would not have been offered on the same terms had it been aware of this condition.

“It is too easy for insurers to deny claims in circumstances where the non-disclosure was an innocent un-related mistake and the insurer would have provided a policy to the consumer anyway on slightly different terms.”

The ALA has outlined this position in its submission responding to policy questions arising from Module 6 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“We are also calling for the courts to have the discretion to disregard insurer avoidance for innocent non-disclosure in circumstances where it would be harsh or unfair to allow the insurer to decline the claim, for example, where the non-disclosed matter is unrelated to the condition that is the basis of the claim,” said Mr Mennen.

The ALA also proposes that insurer surveillance of consumers with mental health conditions should be allowed only with prior approval from an independent body set up to consider and determine such applications.

“Footage of a claimant with a psychological illness performing day to day activities cannot tell you what is going on in their head because with mental health, what you see is not necessarily what you get.

“The Royal Commission has confirmed what we have known for years: Life insurers cannot be trusted to use surveillance responsibly as they have too often taken a trigger happy approach which has aggravated claimants’ psychological illnesses.

“Insurers should be prevented from initiating surveillance on consumers with mental health conditions until they have satisfied an independent body that the claimant has given inconsistent information which is not based on an unconfirmed suspicion and that there is no danger that the surveillance activity will not cause harm to the claimant,” said Mr Mennen.

Read the ALA’s full submission in response to policy questions arising from Module 6 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry here:

Tags: Insurance