CommInsure Managing Director Helen Troup

It took four years and a damaging media investigation for CommInsure to update its definition of a heart attack to reflect current medical practice, along the way it rejected millions of dollars worth of claims that would later be found to be valid, the Hayne royal commission has heard.

Despite an expert consensus from four major global health organisations released in 2012, and in the face of advice from its chief medical officer, the Colonial Mutual Life Assurance Society (CMLA) continued assessing trauma claims as a result of heart attacks under an outdated criteria until a week after a joint ABC and Fairfax Media report in March 2016 took aim at its heart attack definitions.

Even then, claims were backdated only to May 2014.

It also refused to provide information sought by the Financial Ombudsman in investigating the matter – conduct the ombudsman later reported to the corporate watchdog as potentially serious misconduct.

Under questioning from counsel assisting Rowena Orr, Helen Troup, executive general manager of CommInsure since 2014, said the reason the May 2014 date was set was because it was the date of the product’s most recent product disclosure update.

Advice from the company’s product team showing about half of CMLA’s key competitors had updated their definition, placing CMLA safely in the middle of the pack, was also one of the reasons, Troup said.

One customer who made a claim for a heart attack in January 2014 was given a lesser payment of $10,000, which was far short of the $100,000 heart attack payout, because he didn’t meet the “specified severity” required under the old definition.

When CMLA updated its medical terminology, he requested his claim be re-assessed under the new definition but his request was declined because his January 2014 claim fell short of the May 2014 backdate cutoff.

Internally, a point-by-point assessment of the claim under both the old and new definitions found the man’s claim failed under the old definitions, but passed under the new.

The customer reported the case to the ombudsman, which asked CMLA for supporting information, including an assessment of the claim under the new definition.

In a series of letters, CMLA questioned the ombudsman’s jurisdiction and requested it not progress the dispute, and declined to provide an assessment under the new criteria. It also told the ombudsman it considered its request for an explanation why it chose May 2014 as the point to backdate claims to be “not relevant to the assessment of the insured’s claim”.

It later caved and offered an “ex gratia” payment of the full $100,000 to the claimant (minus the initial $10,000), and ultimately backdated claims to October 2012.

At the end of the day’s hearings at the inquiry, Orr put to Troup: “You accept, I think, that CommInsure knew from at least 2012 that its heart attack definition didn’t reflect the universal definition of heart attack?”

“Yes, I do,” Troup said.

“And you accept that until the name of the definition was changed to heart attack of specified severity in 2013, people reading the policy would have assumed that it was intended to apply to all heart attacks?”

“Yes,” Troup said.

“And do you accept that in making decisions not to update the definition between 2011 and 2016, CMLA was motivated by commercial considerations?”

“Yes,” Troup said.

“And that it did not adequately take into account the interests of its customers in making those decisions?”

“Yes,” Troup said.

Troup will continue to give evidence on Thursday morning.

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