HESTA admits it fell below ‘community standards’
| 7 November 2018
The chief executive of industry superannuation fund HESTA, Debby Blakey, has conceded that its prior arrangement with group insurer CommInsure caused it to fall below community standards and expectations.
In a 15-page submission the Hayne royal commission released, Blakey stated that the fund “undertook a process of engagement” with members negatively affected by some Comminsure policies.
“Whilst satisfied that all members issues have now been satisfactorily resolved, HESTA accepts that the CommInsure policies previously offered by it in certain respects did not meet community standards and expectations,” she wrote.
In 2016, a Fairfax Media/ABC investigation exposed poor practices in CommInsure’s life insurance business. Despite ASIC (and three CommInsure-commissioned reports) clearing the insurer of any illegal activity, its reputation remained in question.
ASIC deputy chairman Peter Kell said in 2017 the fact that CommInsure used outdated medical definitions for heart attacks and rheumatoid arthritis did not amount to a breach of the law but added that poor claims handling and claim denials led to “highly distressing experiences” for some policyholders.
HESTA’s admission is part of document dump courtesy of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry ahead of this month’s final round of hearings. On Wednesday, more than 90 submissions, including those from 21 other super funds, were released onto the royal commission site.
The submissions were delivered in response to the commission’s “initial request”, with some dating back to December 2017. They guided the first six rounds of hearings, Which revealed a raft of shocking practices across the financial services sector.
HESTA was not called to give evidence at the royal commission.
Between December 2011 and February 2018, HESTA engaged Commonwealth Bank’s CommInsure to provide group life and income protection insurance to its members.
“As is notorious, it was identified in 2016 that CommInsure policies contained clauses that were identified as being inconsistent with acceptable practice in the insurance industry,” Blakey said.
In 2016, HESTA sought a review of insurance claims made by its members that CommInsure had declined and found that nine required the insurer to reassess them.
“These were subsequently re-reviewed by HESTA and determined to be incorrectly declined or managed claims,” Blakey said. “All nine of those claims were appropriately remedied by July 2017.”
CommInsure had a good reputation prior to the scandal. It provided life cover to about 3 million super fund members and had about $1.8 billion of in-force premiums. There were nine industry schemes through which it provided cover, including QIEC Super, HESTA and Vision Super.
In 2017, HESTA took its insurance needs to AIA Australia, following other former CommInsure clients TWU Super, NGS Super and CareSuper also departing the insurer.
NGS Super moved its contract to TAL.
In its own initial submission, CareSuper said it conducted a thorough review of claims management practices and of declined and disputed claims, “which did not identify any matters of concern”. Still, it transitioned from Commlnsure to MetLife on January 1, 2017.
NGS and TWUSUPER did not identify any conduct that it considered to be below community standards and expectations or that it thought amounted to misconduct.
In response to a question about whether HESTA had identified any misconduct within the fund, Blakey said it had not “identified any instances of misconduct”.