Commissioner Kenneth Hayne

The use of covert surveillance is widespread among Australia’s 10 biggest life insurers and occurs more than twice as frequently in connection with mental health claims as it does with physical claims.

Suncorp Life was revealed as the most prolific user of surveillance, engaging investigators in more than 11 per cent of mental health claims, showed data revealed during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The fifth day of the royal commission’s insurance round also included troubling case studies of TAL Group cancelling insurance claims for lack of disclosure. Also, REST service delivery manager Lachlan Ross was questioned about insurance policy fine print and whether consumers could realistically be expected to be across details that mattered a great deal when they made a claim.

Surveillance activities were undertaken in an average of 1.29 per cent of physical claims, compared with 3.9 per cent of mental health claims between July 1, 2013, and June 30 of this year, the royal commission heard.

Senior counsel assisting Rowena Orr revealed the data after a gruelling two days, during which TAL Group’s general manager of claims, Loraine van Eeden, was questioned over TAL’s surveillance of a mentally ill customer using private investigators, which was ordered by a case manager with little or no oversight or approval mechanisms.

The data showed a significant decrease since July 1, 2016, in claims where surveillance was employed. Orr attributed this to the influence of the Life Insurance Code of Practice, which was released in October 2016, and became binding on subscribers on June 30 last year. This code obliges insurers to use alternative methods of verifying information before resorting to surveillance and provides guidelines for how it can be carried out and required oversight mechanisms.

From July 1, 2016, through June 30 this year, MetLife and Zurich did not engage in any surveillance for mental health claims, and AMP, MLC and Suncorp each referred only one mental health claim to surveillance.

Suncorp Life used surveillance in the highest proportion of claims among the 10 insurers over the period studied, applying it in 4.03 per cent of physical health claims and 11.27 per cent of mental health claims.

A statement by Andrew Morrison, executive manager, life claims, in Suncorp’s personal injury claims division, accepted there were isolated instances in which a private investigator engaged on Suncorp’s behalf had engaged in conduct that might have fallen below community standards and expectations.

In one example, an investigator drove his car erratically in order to follow a policyholder, and in another example, an investigator accepted a surveillance engagement despite personally knowing the policyholder. There were also two occasions on which Suncorp recommenced surveillance despite the policyholder notifying the company it was causing them distress.

Mental health claimant’s saga continues

The royal commission also heard more of the story of a mentally ill woman and TAL’s relentless efforts to find a way to cancel her ongoing income support payments. The story began with her making a claim in 2010 and ultimately dragged into 2016, when TAL devised a strategy to advise the claimant she was in breach of tax laws for not declaring her TAL benefits in her tax return.

The commission also heard TAL cancelled the policy of a woman with cervical cancer because of her “pre-existing depression”– a condition unrelated to the one for which she was claiming. The woman and TAL settled the dispute when the Financial Ombudsman got involved.

Van Eeden said she would be reviewing all claims that were declined since 2013 for non-disclosure.

She acknowledged a range of things, including that TAL case managers had engaged in inappropriate behaviour to seek to avoid paying claims, that TAL had breached professional standards and engaged in misleading conduct, and that in some cases there was a lack of oversight of claims managers.

But she refused to accept outright that the problems revealed about TAL’s management of claims were systemic.

“I don’t know if systemic – I think in certain practices, yes.”

The royal commission later heard from REST service delivery manager Lachlan Ross, who was questioned about the lack of consumer awareness of the fine print of REST’s insurance coverage. Counsel assisting Mark Costello took the hearing through a case study about a REST member whose insurance coverage stopped because his balance fell below $1200.

Five days after his coverage stopped, he became totally and permanently disabled. His claim was denied.

Join the discussion