What is ASIC?
The Australian Securities & Investments Commission (ASIC) is one of the most critical bodies in Australia’s corporate, markets, financial services, and consumer credit regulator.
It is entrusted with the following tasks:
- Promoting confident and informed participation by investors and consumers in the financial system.
- Maintaining, facilitating, and improving the performance of the financial system and entities in it.
- Receiving, processing, and storing information efficiently and quickly.
- Administering the law effectively and with minimal procedural requirements.
- Making information about companies and other bodies available to the public as soon as practicable.
- Taking whatever action it can to enforce and give effect to the law.
What is IDII?
Put simply, Individual disability income insurance (IDII) is integral to your financial plan. It provides an income for some time if you cannot work because of an illness or injury.
IDII, aka Income Protection (IP), is a core product in Australian life insurance offerings. It’s often bundled with other products like trauma protection insurance, and has allowed countless people to maintain their standard of living when they cannot work.
IDII is underwritten on a case-by-case basis, with each life insured evaluated separately. Usually, you want to know the company will be there for you if something goes wrong when deciding on an insurance policy. With IDII cover, you can be sure that insurers will review your claim individually. They’ll work hard to ensure you get the benefits you deserve.
It wasn’t the case, as the ASIC review found gaps in the life insurance industry practice.
What gaps were found by ASIC in IDII?
The Australian Securities and Investments Commission’s (ASIC) newly released a review of nearly 5,000 IDII claims received from January 1 to June 30, 2021, showing gaps in the life insurance industry’s practices.
According to the finding of this review, many life insurers failed to provide customers with appropriate support when they applied for IDII. Of the 5,000 claims reviewed, ASIC found that the insurers declined around 2,000 because they did not meet their eligibility criteria. However, many of these claims would’ve been approved if they had been assessed differently.
Moreover, ASIC found that many policies needed to adequately explain what was required for an applicant to be eligible for cover or how long it would take to receive payments once they became eligible.
This information is imperative for applicants who need to decide about their future based on whether or not they’ll be eligible for coverage under their policy.
ASIC’s review of nearly 4800 IDII claims found that:
- Approximately 5% of claims were investigated without disclosure (252 claims), and 1% were investigated physically (57 claims).
- There appeared to be five insurers who initiated non-disclosure investigations only after the claim was made within three years of the policy’s issuance or renewal, which, in turn, led to an increased risk of ‘fishing.’
- Investigations related to non-disclosure of mental health information account for 40%.
- Approximately 10 mental health claims involved physical surveillance, with ASIC contemplating surveillance unjustified in half of these cases.
- In 17.5% of claims (10 of 57) where surveillance was used, the insurer did not show that other investigative methods had been exhausted before resorting to surveillance.
In response to concerns about using their investigative powers inappropriately or unfairly, ASIC sent a letter to appropriate insurance companies.
They consider those life insurers should only use their investigative powers when it’s proportionate and necessary to do so. The regulator has set several expectations around how life insurers should use their investigative powers.
Precautions to take while buying insurance
You can find quotes for insurance like Income protection online easily. To illustrate, if you are looking for an accidental death insurance quote online, many insurance platforms are hosting such information. Thus, it is a good idea to research the insurer before buying any kind of insurance.
As an alert consumer, you are advised to visit the ASIC’s official website frequently to know what notifications are being sent out by the regulatory body.
Summing it up
Choosing private health insurance like trauma protection insurance and TPD online for your family can be time-consuming and daunting. There are many options, which is why picking the right one can feel like a guessing game.
But there is a big difference between the policies, and you must work out what you need before you start shopping around. Reach out to our team of expert advisors at Aspect if you’re interested in learning more about insurance. We are committed to providing you with the best service possible.