ASIC proceedings against TAL Life Limited for handling of insurance claim

ASIC has commenced proceedings in the Federal Court against insurer TAL Life Limited (TAL) for alleged breaches of the ASIC Act, the Corporations Act and the Insurance Contracts Act, regarding a claim made under an income protection policy.

The regulator’s investigation on this particular claim arose out of a referral made by the Financial Services Royal Commission. The consumer (whose identity cannot be revealed) first made a claim under her income protection policy in January 2014 after she was diagnosed with a medical condition.

After obtaining the consumer’s medical history, TAL sent a letter confirming that her policy would be avoided on the basis that she had failed to disclose some unrelated prior medical history. In that letter, TAL asserted that she had breached her duty of good faith under s13 of the Insurance Contracts Act.

ASIC has alleged that TAL’s investigation of the consumer’s medical history was based on false statements made by TAL in a Claims Pack sent to her.

ASIC has also alleged that in sending a letter to the consumer, in which it avoided the insured’s policy, TAL:

  • avoided the policy without first offering the insured an opportunity to address concerns, and
  • accused the consumer of breaching her duty of disclosure and her duty of utmost good faith under the Insurance Contracts Act.

The company regulator has indicated that it is seeking civil penalties in relation to the alleged breaches of s12DB of the ASIC Act and declarations in relation to s12DA of the ASIC Act, s1041H of the Corporations Act and s13 of the Insurance Contracts Act.

The maximum penalty for a breach of s12DB (false or misleading representations) at the time of the conduct is 10,000 penalty units or $1.7million. Section 13 of the Insurance Contracts Act did not have a penalty at the time of the conduct. If the conduct were to occur under the new penalty regime, effective from March 2019, the maximum penalty would be $1.05 million.

The Government is also currently consulting on an Exposure Draft in relation to insurance claims handling. TAL was an Insurance Case Study detailed in the Financial Services Royal Commission Volume 2 Final Report (pg 331).