Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services I present the committee's report on its inquiry into the life insurance industry.

Report made a parliamentary paper in accordance with standing order 39(e).

by leave—The inquiry into the life insurance industry was referred by the Senate on 14 September 2016 to review:

a. the need for further reform and improved oversight of the life insurance industry;

b. assessment of relative benefits and risks to consumers of the different elements of the life insurance market, being direct insurance, group insurance and retail advised insurance;

c. whether entities are engaging in unethical practices to avoid meeting claims;

d. the sales practices of life insurers and brokers, including the use of Approved Product Lists;

e. the effectiveness of internal dispute resolution in life insurance;

f. the roles of the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority in reform and oversight of the industry; and

g. any related matters.

I see the member for Burt, here, who is on the committee. He is going to speak afterwards.

That referral was fairly tight, but as the inquiry progressed 'any related matters' became quite expansive. We delved into many areas of the life insurance industry, which, when the original referral was made by Senator Williams in the Senate, were raised purely on the basis that he had received many complaints in regard to the processes of claims to life insurance companies. That was the initiation of this report.

Following the referral, the committee advertised the inquiry on its webpage, inviting submissions from a wide range of relevant stakeholders. Through this process, the committee received 77 submissions and a number of supplementary submissions. Once submissions closed on 18 November 2016, the committee held seven public hearings—one in Sydney, one in Melbourne and five here in Canberra—to provide relevant stakeholders and organisations the opportunity to provide evidence to the committee.

Life insurance has a noble purpose: to provide financial protection to policy holders—that is hardworking Australians—in times of immense need and financial and emotional distress. In doing so, the life insurance industry forms a significant part of the financial services sector in Australia. Again, the member for Burt will agree with me that there are many expectations of life insurance. But there are different parts of stakeholders, and there are different parts of the community, who have different expectations of what life insurance should provide and shouldn't provide, and we found that out during the inquiry. Despite this, there are sections of the industry that can and must do better in delivering the protection they promise whilst remaining financially viable long into the future securing policies of current policy holders

As at September 2017, there were 29 life insurers in Australia. The big four banks each owned life insurance businesses until 2017, when some of those life insurance businesses were either completely or partially sold. Whether that was as a result of this inquiry, I couldn't exactly say, but I know the probing by the member for Burt had many stakeholders and life insurance companies on the edge of their seat.

For the benefit of the House, the committee has taken a broad view of the life insurance industry covering direct retail and group life insurance products, including life cover, also known as life insurance or death cover; total and permanent disability, or TPD; trauma cover; and income protection.

The committee's inquiry has followed on from an overlap with significant reviews and legislative changes, as well as the ownership changes in the industry, and it was a moving feast during the time of the inquiry.

The report focuses on areas where substantial changes are required to ensure the life insurance industry is held to account in relation to effective consumer protection and industry codes of practice; the transparency of remuneration, commissions, payments and fees; the provision of advice in the best interests of consumers; group life insurance arrangements that do not disadvantage certain groups of consumers; appropriate access to personal, medical and genetic information; and a fair claims-handling practice, which should also be a timely claims-handling practice.

I'd like to take this opportunity to acknowledge and thank all of those who've contributed to this inquiry, be it through written missions or evidence provided during the hearings. The evidence we received provided a strong evidence base, which informed our deliberations and the report.

The areas that we did delve into were, obviously, consumer protections, the codes of practice, remuneration, commissions, payments and fees, which I have mentioned, the retail life insurance and approved product lists, group life insurance, access to medical information and genetic information—mental health played an important role during the process for all those items I've mentioned—and, again, the claims handling. One of the things I personally feel is important, that this industry should look at and should be targeted is the transparency and that definitions of life insurance be harmonised amongst the life insurance companies and also the fact that we can track a parcel from one side of Australia to another by going on to a website, but, unfortunately, people are putting in claims for life insurance, which need to be treated fairly, equitably and quickly, but they cannot follow the process of that life insurance claim, whether it be a TPD claim or whether it be any other form of claimed workers' compensation.

I thank my fellow committee members for their contributions to this inquiry, which I know will effectively improve consumer outcomes and the sustainability of the life insurance industry; my Deputy Chair, Senator Deb O'Neill, who I've had the pleasure of working with on a number of inquiries; my parliamentary colleagues, including the member for Forde—his work on the financial services sector was invaluable—the member for Mackellar; Senator John Williams; Senator Hume; the member for Griffith; the member for Burt, who I said is in the chamber; Senator Chris Ketter and Senator Peter Whish-Wilson.

I would like to add a special comment and thanks to Senator Williams for his commitment to this inquiry and his commitment to represent the people who came to him with claims about being treated unfairly by the life insurance industry. For as long as Senator Williams has been in the Senate he has been a strong advocate for improvements to this industry. I would also like to pass on my sincere thanks to the committee secretariat, particularly Patrick Hodder and Jon Bell, for the enormous amount of work they've put into this inquiry. This is the second major inquiry I've had the privilege of working with this committee on. The previous one we did was the whistleblower inquiry, which is equally important to many Australians. I would like to thank those two gentlemen for the professional and dedicated approach they’ve taken to handling this inquiry. And it would be remiss of me to not thank Hansard, broadcasting and the staff of committee members. I am very proud of the informed recommendations contained in this report, and trust it provides a constructive way forward for the life insurance industry. I commend the report to the House.

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

This is another unanimous report of the Parliamentary Joint Committee on Corporations and Financial Services. This inquiry was into the life insurance industry, which includes life insurance, trauma, and total and permanent disability insurance as well as income protection insurance, whether purchased directly, on an advised basis or through group arrangements, such as through superannuation. I would like to thank all those individuals who took the time to make submissions to the committee and to attend hearings, speaking about their engagement with the life insurance industry. Your contributions have helped to shape the recommendations which we are making in this report today. I would also like to thank my fellow committee members for their collaborative approach to the committee's work, and to the committee secretariat staff for their very diligent and helpful work; I'm sure they felt at times that they were herding cats.

In particular, I would like to acknowledge the contribution made by a group of academics associated with Monash University and beyond, who shone a light on the issue of genetic testing and its implications on life insurance, an issue which until now has received too little attention. Currently, insurance companies are allowed to use genetic test results to discriminate against applicants for life, permanent disability and income protection insurance with little independent oversight or consumer transparency. This information seems to only be used against insurance customers, not for their advantage. This discrimination can deter people from getting genetic tests and being involved in medical research that could prove useful in their own future health as well as for scientific understanding of diseases.

In the course of our hearings, we heard the story of a woman who had discovered that she was born with the BRCA gene, which is known to increase a person's risk of breast cancer. She elected to have a double mastectomy in order to reduce her risk. When she later applied for life insurance, the outcome of the woman's original genetic test was taken into account, but her consequent significant risk reduction wasn't. Ultimately, the insurer chose to exclude any cancer coverage from her policy and imposed a 50 per cent premium loading for death cover. The effect of this and many other instances is that Australians will be less likely to access lifesaving genetic tests so that they do not limit their access to affordable life insurance. Indeed, an oncologist remarked to me recently that, in her consultations with patients, even more time is spent—and indeed wasted—on the ramifications for insurance from the tests that they discuss than on actually discussing the health ramifications themselves.

This report recommends that the Financial Services Council, in consultation with the Australian Genetic Non-Discrimination Working Group, assess the consumer impact of imposing a moratorium on life insurers using predictive genetic information unless the consumer provides genetic information to a life insurer to demonstrate that they are not at risk of developing a disease. We also recommend a number of changes to the life insurance code of practice to support this. This borrows from the UK model, often touted as global best practice in this space. We propose a moratorium be placed on the use of predictive genetic information while this technology is still in its early stages, and until it is better understood. However, if the Financial Services Council and life insurers are unable to get to this position and achieve compliance, legislative intervention will be required. Indeed, in my view, this should happen in any event and should not just be limited to the predictive genetic information.

Another key area of the report's recommendations focuses on the application of the government's Banking Executive Accountability Regime legislation, the BEAR. In particular, we have proposed that the scheme apply to the life insurance industry and that the BEAR scheme be expanded to include consumer related conduct issues, enabling ASIC to take action on these matters, as is the case under the UK senior executive accountability regime upon which the BEAR is supposed to be based.

The report also contains progressive recommendations in relation to the accessing and use of medical information as well as expanding prohibitions on unfair contract terms into the life insurance sector. There are many other very worthwhile recommendations; in fact, all of the other recommendations of this report are worthwhile.

While this consensus report highlights that it is entirely possible for members of opposing political parties and from different chambers to agree recommendations in a key area of public policy, I have to say I have little confidence that this government will be implementing all, if indeed any, of these proposals. Just six months ago I spoke here on the tabling of this committee's last report, into whistleblowers. The report made a number of key recommendations—including the introduction of a reward scheme, the establishment of a whistleblower protection authority and changes to the powers held by a number of government regulatory and enforcement agencies—none of which were included in the legislation subsequently proposed by the Minister for Revenue and Financial Services.

I commend the report and its recommendations to the House and hope that it is actioned by government and by industry for the benefit of so many Australians that rely on the life insurance sector.

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

I move

That the House take note of the report.

Tony Smith (Speaker) Share this | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.