Winning an insurance claim can be a tall order.
In the wake of revelations that Commonwealth Bank's CommInsure life insurance division has routinely denied payouts on shaky grounds, a new report by the Financial Rights Legal Centre report suggests that the issue is widespread.
The report, 'Guilty until Proven Innocent: Insurance Investigations in Australia', lays out a convincing case that a culture of claims denial is well entrenched in the insurance industry.
The research was based on the real life experiences of 40 policyholders whose insurance claims had been investigated rather than paid out. These policyholders, many of whom are already under considerable financial and other stress, have borne the brunt of the industry's tightfistedness, according to the report.
Don't pay – delay
"The tactics revealed in the recent CommInsure scandal are the tip of the iceberg when it comes to claims handling abuses in the insurance industry," says Alexandra Kelly, Financial Rights Principal Solicitor.
"We regularly hear of consumers being threatened with the rejection of their claim or other outrageous conduct such as having their relatives reported to immigration. Many of our clients feel than they have been subject to racial profiling and others with poor English skills have not had access to appropriate translators.
"Consumers are also subject to incredibly long interviews – sometimes over five hours in length. Our clients routinely feel bullied, harassed and intimidated by investigators and often describe being treated like criminals."
Insurance fraud overstated
In addition to drawing on the case studies, the Financial Rights Legal Centre surveyed insurance law services callers (people who have called for help with denied claims), interviewed insurers and insurance investigators and conducted an analysis of Financial Ombudsman Service decisions.
The average length of a claims investigation, it turns out, is about 18 months, and some take three years and longer.
"In the end the investigation process is so onerous that many simply withdraw their claim – not because of any admission of fraudulent behaviour but because the process is too burdensome or invasive for many consumers to bear," Ms Kelly says.
Ms Kelly also disputed insurance fraud figures, saying the $2.1 billion per year put forth by the industry is based on a 20-year-old estimate of claims that were merely "believed to be fraudulent".
"We of course are not saying that fraud doesn't exist. It does. However it is this type of exaggerated rhetoric that builds a 'guilty before proven innocent' culture and ultimately helps justify the industry's poor treatment of policyholders."
The Financial Rights Legal Centre is calling for the insurance industry to establish a set of good practice standards for investigations under its Code of Practice. It also says a Code of Practice for life insurance should be established and registered by ASIC.