Sarah Court

The corporate regulator has taken OnePath Life to court after an investigation found advice from an ANZ financial adviser was a “breach of good faith”.

ASIC commenced proceedings in the Federal Court, alleging it failed to comply with its duty to act with utmost good faith during claims handling. The policy was obtained in 2016 when OnePath was still owned by ANZ.

This is the first time ASIC is seeking financial penalties for a breach of this duty, following the introduction of new civil penalties in 2019.

In a media release on Thursday morning, the regulator said a customer made a claim on her policy in 2018 following a shoulder injury. OnePath subsequently investigated the customer’s prior medical history which found she had been hospitalised for mental health issues prior to applying for the policy.

OnePath elected not to pay out the policy which ASIC alleges is failure to “act with utmost good faith” in handling of the customer’s claim.

ASIC said OnePath failed to make it clear to the customer the lack of disclosure was fraudulent or follow up why her relevant history was undisclosed, as well as her rights to appeal the decision through internal and external dispute resolution systems.

Not to be taken lightly

In March 2019, powers were legislated granting ASIC the ability to pursue harsher civil penalties and criminal sanctions, which included policing the Insurances Contract Act 1984. The duty of utmost good faith is an obligation that arises under section 13 of the act.

ASIC deputy chair Sarah Court said that accusing a customer of fraud is a serious allegation that insurers should not make lightly.

“If an insurer is concerned a customer has engaged in fraudulent non-disclosure, they must make their concerns explicit, give the customer the opportunity to respond and make proper inquiries into any explanation given by the customer before concluding that fraud has occurred,” Court said.

“The insurer’s duty is not just owed to whoever the insurer considers to be a perfect policyholder.”

Court added insurers play an important role in providing financial security to consumers, particularly in times of crisis.

“Consumers need to be confident that their insurer will act in good faith and provide procedural fairness when handling their claims,” Court said.

OnePath Life was a subsidiary of ANZ until 31 May 2019 when it was acquired by Zurich Financial Services. Zurich has since acquired ANZ’s life insurance advice arm which it relaunched in August.