On 17 March, the claim was again denied. Orr continued to unpick the bank’s shabby treatment of the policyholder, but the more she questioned Troup, the more it became apparent that Troup thought it was an isolated case.
‘I do feel that the opinion of what radical breast surgery was initially was reasonable and genuine,’ she said. ‘But the outcome . . . did result in us not fulfilling utmost good faith.’
CBA updated the 1988 definition in May 2017 but didn’t backdate it, which meant the old definition still applied to anyone who had taken out insurance before that date.
‘Why did CommInsure not backdate that definition?’ Orr asked.
‘So . . . the approach is that applies for new claimable events,’ was Troup’s response.
Orr referred to the heart attack definition which had been backdated and asked why CommInsure hadn’t done the same with this one.
‘That’s because that definition was out of date,’ Troup said.
‘And you didn’t accept that this definition was out of date?’ asked Orr.
‘No’.
The breast cancer survivor complained to FOS in April and was eventually paid out in September 2017 after FOS reviewed her case and recommended that CommInsure should pay her claim. But the saga didn’t end there. On 23 July 2018, FOS wrote to CommInsure saying it found there was a ‘definite systemic issue in relation to CommInsure’s interpretation of “radical breast surgery” as being limited to a mastectomy’.
Orr asked Troup, ‘Do you disagree that it’s a systemic issue?’
Troup replied, ‘I feel like it was just an isolated event, yes.’
Orr then asked whether CommInsure planned to review its past claims.
‘Not at this stage,’ said Troup.
‘Should there be a decision made to do that, Ms Troup?’
‘As I said, I think I would like to discuss that with the business . . .’
‘But you’re not prepared to make a commitment that that will happen?’
‘Not today, no.’
*
Next it was time to scrutinise CBA’s relationship with ASIC regarding CommInsure’s misdeeds. Getting a rare glimpse into the bank’s confidential dealings with ASIC was profoundly insightful.
As the basis of her examination, Orr used an investigation that ASIC had undertaken in 2017 into marketing material for CommInsure’s life and trauma insurance. The investigation had been triggered by my joint Four Corners exposé of CommInsure.
To ensure viewers fully understood what she was talking about, Orr posted CommInsure ads on screens around the courtroom. They showed slick, glossy brochures with photos of babies and toddlers, as well as older people, which were clearly designed to tap into the human fear of getting sick or dying.
Orr read out the wording of one ad which said, ‘This cover can pay a lump sum to help with medical costs if you suffer any one of our specified trauma conditions, such as cancer, heart attack or stroke. It’s part of our tailored insurance range.’ Orr pointed out that nowhere in the material did it mention that ‘heart attack’ meant only some heart attacks – which was one of the things that had concerned ASIC.
As Troup was shown the various ads, she didn’t flinch. Her defence was that the details of the types of heart attacks covered were in the product disclosure statement for the policy. But as Orr pointed out, this was an entirely separate document – one that most people would struggle to find and, if they did, understand.
Orr then showed Troup emails from ASIC relating to how the regulator dealt with the misleading ads. In late 2017, ASIC’s senior executive leader of financial services enforcement, Tim Mullaly, sent CBA the wording ASIC proposed to use in its media release regarding the issue and the penalty CBA would incur: ‘To resolve ASIC’s concerns, CommInsure has agreed to make a voluntary community benefit payment of $300,000.’ Quite a bargain if you considered that when the ads were placed, the maximum penalty for misleading and deceptive conduct was 10,000 penalty units, or almost $2 million, for each of the four highlighted contraventions.2
ASIC’s email to CBA continued: ‘We will, of course, need to agree with CommInsure the timing of a number of steps, the community benefit payment recipient and the nature and details of the review.’ Mullaly asked CommInsure to get back to him to let him know if ‘this is sufficient for CommInsure to resolve the matter’ and whether it was happy with making a community donation rather than receiving an infringement notice and a fine (which of course would have been far more serious and embarrassing for CBA).
At this point a silence fell across the room. It was extraordinary to witness so vividly the extent to which ASIC had kowtowed to CBA. Even Hayne couldn’t hide his shock, quizzing Troup: ‘The regulator asking the regulated whether the proposal was sufficient in the eyes of the party alleged to have broken the law. Is that right?’
Troup’s response was deadpan: ‘I guess . . . we could have taken an approach of continuing to defend our position, and so this [coming to an agreement with the regulator] was the alternative.’ In light of the misleading ads, it didn’t seem that the bank had a position to defend.
If ASIC’s obsequious behaviour seemed incredible to the courtroom, Orr had more revelations. On 17 October 2017, CBA replied to Mullaly, saying it would consider the ASIC letter and respond as soon as possible. However, by 2 November Mullaly still hadn’t heard from the bank and wrote a follow-up email asking if CBA had considered his proposition. The following day CBA responded with a revised version of the media release (initialled by Helen Troup). To highlight the number of changes CBA made, the two versions were shown side by side on the screens in the courtroom. They looked like different documents. Among the most significant changes was the deletion of a sentence saying that CommInsure had been deceptive and misleading in its advertising.
ASIC had finally posted the media release on 18 December 2017, a week out from Christmas, when many people are on holidays, including journalists.3 Not surprisingly, it didn’t get much publicity. As Orr read it out, it became obvious that ASIC had accepted key changes suggested by CBA, which had altered the tone of the document and played down the gravity of CommInsure’s misconduct. The published press release watered down ASIC’s strongly held concerns that the ads were deceptive and misleading. Instead, it said the ads were ‘likely to have been’ misleading and ‘may have led’ a policyholder to believe they were entitled to a payout. As Orr noted, ‘The media release contained no acknowledgement by CommInsure of any form of wrongdoing in connection with these advertisements?’
Troup replied, ‘That’s right.’
Hayne asked, ‘At the end of the day, Ms Troup, did CommInsure come out of this process thinking it had been punished or brought to book?’
‘Yes we did, sir,’ Troup defiantly replied.
It beggared belief firstly that ASIC would be party to this, and secondly that a senior executive of a bank generating profits of $10 billion a year would think that such a soft, edited press release and a $300,000 donation was punishment.
It prompted Rowena Orr to ask how the figure of $300,000 had been arrived at, to which Troup said she didn’t know. Orr reminded Troup of the maximum penalty under the ASIC Act 2001: $2 million per contravention.
To bring home not only the lightness of the punishment but also the entrenched adversarial bias CBA had towards its clients, Hayne pushed Troup: ‘$300,000 is three times the claim of the particular insured person who forms the foundation of this case study, is that right?’
‘Yes, that’s correct,’ she responded.
Hayne probed further: ‘Leave aside whether you count each publication as a separate contravention, if we take the type of alleged contravention, being singular for each advertisement, the maximum punishment was the order of $8 million, was it not?’
Troup looked into the distance. Facing so much evidence and Hayne’s disapproval, she finally, begrudgingly conceded that the ads had been misleading – something the bank had never previously admitted, neit
her to itself nor to ASIC. ‘I think at that time we were still defending our position and believed that there were other circumstances around, but sitting here now looking at the way it was positioned, I can see how ASIC’s concerns were legitimate,’ she said.
Listening to Helen Troup concede this, whistleblower Dr Ben Koh took some comfort. When he’d raised issues of unethical goings-on to Troup, she had been dismissive of his concerns. ‘She made me feel that my concerns were misplaced . . . like I was the one in the wrong for raising the concerns. It was a bizarro world. Instead of focussing on the wrongdoings, the focus was on the person who brought attention to the wrongdoings,’ he said.
The handling of the draft CommInsure media release reflected badly on ASIC: it spoke of capitulation and regulatory capture. It also suggested CommInsure was guilty of bad practice, bad faith and hubris – something, of course, not restricted to CBA. It also reminded me of a statement made by ASIC to parliament in 2015 that it would change its practices on press releases and only offer them to regulated entities twenty-four hours before publication. ASIC had restated that policy in parliament on 31 May 2017, when ASIC’s deputy chairman, Peter Kell, told senators including Wacka Williams, ‘With large entities, in particular, if there is the prospect at times that the action we are taking may have a material impact for negotiated outcomes, we allow a short window of up to twenty-four hours for checking the accuracy.’ The case illustrated by the royal commission suggested this message hadn’t been understood at lower levels of the regulator.
In September 2017, CBA had announced the sale of its scandal-ridden life insurance business, booking $300 million less on the sale and slashing $1.4 billion off its goodwill. Troup and many others in the bank mightn’t have thought CBA had done much wrong, but the write-down no doubt reflected the reputational damage caused by treating customers poorly. The new owner, Hong Kong–based AIA, didn’t continue with the CommInsure trading name.
*
There was widespread concern that the currency of medical definitions and the general practices of insurers were significant issues among other companies too. The royal commission had therefore asked ten life insurers – CommInsure, TAL, Zurich, MetLife, NAB’s MLC, Suncorp, AMP, Westpac, ANZ’s OnePath and AIA – about their procedures for reviewing and updating medical definitions. The response was illuminating.
CommInsure told the commission it didn’t have any deficiencies in its processes and procedures for updating medical definitions. It said its failure to update its heart attack definition was a commercial misjudgement.
TAL told the commission it didn’t have a formal process in place to annually review the currency of its medical definitions until 2016. Zurich and MetLife said until 2016 they didn’t have a formal process in place to review definitions. MetLife said in 2016 it reviewed and changed twenty-one definitions. It took NAB’s MLC until 2017 to document the process for reviewing definitions.
AMP didn’t conduct a formal and regular review of medical definitions until 2017. Suncorp didn’t have a framework in place and relied on informal processes and ‘ad hoc’ medical definition updates but, it told the commission, it intended to conduct medical definition reviews every three years.
The royal commission also wrote to the insurance companies asking them about the procedures they used when assessing claims. This yielded admissions of spying on policyholders, including using hidden cameras and stalking. In one case recounted to the royal commission, a nurse diagnosed with an anxiety disorder had lodged an income protection claim with the country’s biggest insurer, TAL, in January 2010. TAL had then hired a private investigator as part of a campaign to block her claim. A TAL claims manager told the investigator to ‘do a pretext’ at the hospital she used to work at to see what information could be found and talk to the local police to see if they had anything on her. The investigator spied on the mentally ill nurse, filmed her undressing before she went for a swim and took photos of her bushwalking and kissing her partner. When the claims manager found out she had once written a book, he sent the investigator an email saying, ‘OMG here is another one for you . . . I want results.’
TAL tracked the nurse’s social media and obtained her medical records, Medicare documents and tax and other financial records. At the time TAL was paying the nurse $2750 a month in income protection insurance. As Orr put it to witness Loraine van Eeden, TAL’s general manager of claims, who had joined the company in January 2018, rather than just pay up, ‘TAL elected to pay $20,000 to a private investigator to try and stop these payments’.
In 2014 TAL rejected the claim and ceased payments, falsely accusing the nurse of fraud. It then threatened her with legal action if she didn’t repay almost $70,000 to the insurer. Orr read out letters from the nurse’s psychiatrist, who had initially said her condition was improving but in a report six years later found that she had deteriorated and was by then suffering from an ‘insidious and malignant psychiatric illness’. The psychiatrist said the condition had originally been triggered by workplace stress but now had ‘a life of its own’, with the nurse demonstrating ‘suspiciousness, lack of trust, social withdrawal and isolation . . . panic attacks, anxiety and difficulties with memory and concentration’.
Van Eeden said, ‘I can agree to us causing her stress but I cannot comment on the exacerbation of her medical condition as there could be many other factors as well.’ She admitted, however, that TAL had breached the former nurse’s privacy over a lengthy period. After being contacted by the claimant, the FOS found against TAL. After seeking further ways to reject the judgement, the company finally agreed to pay out $89,000 to the nurse, followed by $35,000. But the insurer had put her through hell.
The statistics provided by insurers to the royal commission showed that most of them engaged spies to monitor policyholders who’d lodged mental illness claims. Suncorp admitted to spying on 17 per cent of policyholders who’d lodged a mental health claim between 2014 and 2015. Westpac’s life insurance arm had spied on 9.3 per cent of mental health claimants between 2013 and 2016, while CommInsure, between 2013 and 2016, had spied on 7 per cent of mental health claimants and 1.3 per cent of physical health claimants. Surveillance activity declined after 1 July 2017, when the life insurance industry introduced its code of conduct, which included restrictions on such activity.
TAL’s behaviour was symptomatic of an organisation with deep systemic issues, but van Eeden would not concede this. Like most of the other insurance company witnesses, she passed off the bad behaviour as either an isolated incident or as merely inappropriate or below community standards. But it was so much worse than that.
*
After hearing a series of horrifying case studies from TAL and CommInsure, the royal commission turned its attention to direct insurers. ClearView and Freedom Insurance were selected to give evidence about the high-pressure sales tactics they used to sell products such as funeral insurance and life insurance. It was jawdropping stuff.
ClearView’s chief risk officer, Greg Martin, admitted that ClearView had clocked up 303,000 criminal breaches of the law after failing to comply with anti-hawking laws laid down by the Corporations Act. Under the law, a person must not try to sell financial products during an unsolicited telephone call or an unsolicited meeting.
At ClearView, as emails presented to the royal commission showed, sales executives were awarded with gift cards if they reached particular sales targets, and during so-called incentive days staff were sent messages such as ‘Let’s rip it up’ and ‘I want this joint pumping with belling, clapping and SALESSSS.’ The name of the game was to sell as many policies as possible, and there was even a plan to target poorer Australians.
Seeing the writing on the wall, ClearView had stopped selling direct life insurance before the royal commission.
It was grubby stuff, but nothing prepared me for an audio recording of a 2016 phone call made by a salesman at Freedom to a twenty-six-year-old man with Down syndrome. The agent was trying to sell funeral,
accidental death and injury insurance. It was obvious the young man was having difficulty understanding the conversation, but the agent signed him up anyway.
The young man’s father, Grant Stewart, a Baptist minister, told the royal commission that his son remembered speaking to someone on the phone and providing that person with his debit card details, but couldn’t explain why he’d done so. When Stewart learned that his son, whose only source of income was the disability support pension, had been signed up for insurance he didn’t want, need or understand, he tried to cancel the policies. But Freedom dragged its heels. The commission viewed one internal message in which a sales staff member who had reviewed the sales agent’s initial call claimed it wasn’t clear Stewart’s son was disabled. ‘I’ve had a listen to the call,’ the message said. ‘Not once does the policy owner mention anything about being disabled, or not being able to make decisions for himself, etc. So it would have been hard for the sales agent to assume that the policy owner had a disability.’
At one point, Stewart called Freedom’s retention department and the person he spoke to refused to cancel the policy unless he put his son on the phone and had him say the words, ‘I wish to terminate the policy.’ He did so, but Stewart said his son was ‘quite distressed’ by the experience. Furthermore, it took many subsequent letters and calls before Freedom kept its side of the bargain.
Freedom’s disgrace didn’t end there. Orr read out an internal message in which the retention officer told one of the staff that Stewart was a ‘bloody whinger . . . I don’t know what he expects to get out of it LOL.’
Commissioner Hayne said he believed the community might be ‘particularly struck’ by the phone call Stewart’s son had to make, and that it was ‘a particularly affecting record’. That was an understatement: the media and twitter went into overdrive.
Freedom operated a classic boiler-room culture. Sales agents were offered incentives, such as gift vouchers and trips to Bali, and retention officers, whose job it was to convince customers not to cancel their policies, earned bonuses for each customer they ‘saved’. ‘We’ve got $150 to give away in today’s incentives,’ one internal sales campaign told staff in an email shown to the royal commission. ‘Target is 400 lives by lunchtime. Everyone aiming for seven over the first two sessions. 3.5 lives per session (Easy Peasy) and we’ll smash 400 lives to lock in the incentive money for the last part of the day.’ In another email dated July 2018, agents were told ‘anyone that gets eight funeral lives or more will go into a draw on Monday morning. Newbies, anyone who gets six funeral lives or more will go into a draw . . . Every life over your target will get a bonus entry. $100 to give away. Get selling.’ It was particularly troubling that the emails had been handled by the firm’s quality assurance division, which is meant to monitor agents’ behaviour and compliance.
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