Wednesday, 28 March 2018
Corporations and Financial Services Committee; Report
Before I call the member for Griffith, could I just remind members in the Chamber that we had an earlier general conversation about—
Mr Dick interjecting—
Mr Howarth interjecting—
Member for Oxley and Member for Petrie, could you take that conversation outside the Chamber. Thank you very much.
I rise in respect of the recent report on life insurance that was tabled in the House this week. It's a report that was released by the Parliamentary Joint Committee on Corporations and Financial Services, of which I'm a member, and I was part of the inquiry that gave rise to the report. I wanted to make just a few observations about some of the issues that we canvassed in the submissions and hearings in this inquiry. Of course, there were a really wide and interesting range of issues raised by submitters, so I certainly can't touch on all of them in the short time available to me, but there are a few that I thought would be worth commenting on today.
The first one is mental health. Mental health is an issue that affects many Australians. Understanding of mental health has been evolving over recent decades. The way mental health interacts with life insurance and with insurance generally has attracted significant attention in our inquiry and more broadly. There is significant value in continuing discussions about the role of insurers in respect of prevention when it comes to mental health. Once someone has developed a mental health issue, it's complicated to have insurers involved in rehabilitation, for various reasons, the obvious one being the potential for conflict of interest: if you're paying the claim and are also responsible for determining whether somebody has been rehabilitated then that can give rise to some fairly obvious concerns. Prevention is a different category of work. It is worthwhile giving some thought to what contribution insurers might be able to make towards work preventing people from developing mental health issues in the first place. That won't be determined in any kind of hurry, but it should be considered and further discussed.
We also had significant material before us about mental health exclusions—provisions in insurance policies that exclude people from coverage in respect of mental health issues—and obligations to disclose pre-existing mental health issues. We had a useful discussion on that in this inquiry. We need to ensure that (1) people can get coverage in respect of mental health issues and (2) people are not dissuaded from seeking help and getting diagnoses in respect of mental health issues because they're concerned about the potential impact on their insurance. I look forward to continuing public debate about what can be done to make insurance and mental health prevention work better and to ensure that people are not prevented from obtaining insurance because of mental health issues and, similarly, not dissuaded from seeking help with mental health issues because of insurance issues.
There was some discussion about doctors on one hand and insurers on the other having different perspectives when it comes to the production of medical information and records. I encourage doctors and insurers to work together on this issue. There are recommendations about it in our report, but disagreements over disclosure will ultimately lead to poorer outcomes for consumers and patients, because the cost of disagreement will be visited upon them. I encourage doctors' organisations, whether it's the AMA or the RACGP, and insurers' representatives to collaborate, open a dialogue and continue to discuss what can be done to serve consumers' and patients' interests.
The next issue is genetic testing. This was probably one of the most hotly contested issues in this inquiry. Patients who have genetic tests don't want a potential propensity towards a particular disability, illness or disease to affect the premiums they pay or their ability to get insurance in the first place. Similarly, those who undertake genetic testing for research reasons have legitimate concerns about the potential for insurers' use of genetic testing to lead to a chilling effect on people's willingness to participate in genetic testing for research purposes. There are also, quite rightly, concerns about the potential impact on consumers more broadly. If insurers are unable to consider genetic testing results, will they assume that a proportion of the insured population have particularly propensities and price that risk into premiums for everyone, and if so, is that fair to all consumers?
The use of genetic testing is not a simple issue. We have sought to strike a balance in respect of this issue in the report. I think that reasonable minds could quite easily differ about how this issue could be dealt with. I wanted to put on record my thanks to all submitters who raised issues about that particular topic, genetic testing, because it is a complex question and it can have a real impact on people's lives—patients, consumers, beneficiaries of research, potential beneficiaries of research, people who undertake research, and, of course, firms and shareholders. A range of different interests arise, and we need to make sure that we take them into account.
The other thing I briefly wanted to touch on before ceding the floor to my friend the member for Forde, who was also on the inquiry, is the issue of insurance in superannuation, particularly insurance that is a default product in superannuation. There have certainly been some concerns raised with people in the public debate about the potential for insurance premiums to eat away at your superannuation balance, particularly if you have a low balance. I just wanted to mention the corollary to that perspective, which is that, if you were to take away default insurance products, that would leave people in a situation where they are quite likely to be uninsured in the event of some catastrophic injury or illness. For example, if you develop cancer and have to take a year off work, you might never have thought about income protection insurance, life insurance, TPD—the insurance products that might be in your superannuation. You might never have bought those insurance products. But suddenly you've got multiple sclerosis or you have cancer or you've had a terrible injury that's not covered by workers compensation or motor accident compensation, and it can be an absolute godsend to have that insurance that you never would have thought to get and you wouldn't have if it weren't for it being a default product in your superannuation fund. So I am very pleased that we considered this issue in the inquiry. I certainly have had family members who've had to take long periods of time off work unexpectedly because of serious illness. If you don't have the insurance and you are then forced to refinance your house because you couldn't afford to work and you didn't have any income support, that's a pretty significant issue. I wanted to mention that, again, I think there are a range of considerations in this question, but I did want to emphasise my own perspective on that particular issue and my concern to ensure that people do have the support that they need in the event of catastrophe.
I want to record my thanks to the chair of the committee, the deputy chair of the committee, the other members of the committee and of course the secretariat. We have an excellent secretariat in the Parliamentary Joint Committee on Corporations and Financial Services, and I am very grateful to them for all the work they continually do. I also want to express my thanks to all of the submitters to the inquiry, particularly those who took the time to come and give evidence in person. But my thanks go to everyone who made a submission; some made more than one submission. These were complex, detailed issues that we dealt with over a long period of time. We received significant support from experts in the community, many of whom were just there out of altruism and community-mindedness. Some also had some private interests that would be served by recommendations made, but I have to say there was a lot of willingness to be involved in this inquiry and to really give time and effort to try to help us to reach the right conclusions and give the right recommendations. I place on record my appreciation for all of them.
I would like to associate myself with the remarks just made by the member for Griffith. I think this report really demonstrates the great work that is done in this parliament across party-political lines, where committees take the time to thoroughly investigate a particular issue or a set of concerns that are raised from whatever the source may be and produce a report such as this, which has covered a wide range of issues on a bipartisan basis. I think it is a great testament to the quality of the work and the willingness of the committee to work together to get this outcome. I think it's a pity that more of the work that is done in this place is not seen by the public at large, instead of some of the other things that they see.
The reason this inquiry is so important is that insurance is incredibly important to the lives of Australian people. And, at the end of the day, that was what the focus of this inquiry was about. It was about how we seek to craft a set of recommendations that will improve the operation of the industry for the benefit of the Australian people, particularly at a time when they need it. We have spent a lot of time over the last few years focusing on the provision of advice, the initial up-front component at the beginning of a process with the life insurance industry or the investment industry—for the sake of this contribution, we'll focus on the life insurance industry. The advice part is incredibly important, because there is a requirement for advisers to ensure that the products they recommend or the strategies they recommend are in accordance with the client's best interests. We never know really, at the outset, whether that's the case, but where the rubber hits the road is at the time of claim. This, in part, was one of the catalysts for this inquiry in the first place—issues in the claims process as identified in the media. That is where the focus of this report has been. How do we improve the claims process? How do we improve the quality and the clarity of the terms and conditions within life insurance or income protection policies? They are very complex and wordy documents and there are a variety of definitions across all of the 29 different companies that provide insurance in Australia. That is where the complexity arises.
I can well understand the difficulty many Australians have in understanding what they actually have in their insurance policy. I think it's fair to say that we in this place know the complexity of these documents and how much reading is involved, and I'm sure that even we would admit that, with all of the reports and other things that we get across our desks, we don't necessarily read everything, because it's actually impossible to do so. I would suggest that it's the same for consumers. They get documents that are wordy. They are legal or are legalistic in their wording. They don't take the time to read through them in great detail. And, even if they do, they'd probably find them hard to understand. That's what some of the recommendations in here are around—improving understandability, transparency and ease of reading for consumers so that they can actually understand what they are getting in their cover. I think that is critically important. As I said, it's at claims time when the rubber hits the road, and a lot of our time was focused on how we improve that process.
One of the issues that was identified was the issue of definitions of medical conditions, and one of the recommendations specifically addresses that issue. It's the responsibility of insurance companies to ensure that the definitions in their products are regularly kept up to date, not only in retail life insurance products but also, importantly, in group life.
The media reports leading up to this particular inquiry identified a number of circumstances involving policies in a group life setting. The committee did a tremendous amount of work around: how do we improve the understanding for consumers of what insurance cover they actually have within a group life setting, particularly within their superannuation fund? The member for Griffith touched on this in her contribution. It is very, very important, because people in a very difficult circumstance in their life need to understand or have the understanding that they have some security in the event of a terminal illness or cancer or in the event of an injury where they can't work for a period of time. They need to be able to ensure that the process of protecting their financial situation is robust. Medical definitions not being up to date doesn't assist with that.
In the group life setting, we also discovered a number of instances where people actually had cover but, due to the conditions and terms within the super fund, couldn't make a claim, because they weren't getting contributions or the balance wasn't at a certain limit et cetera. So we had situations potentially where people were paying premiums on insurance policies which they couldn't actually claim on. What benefit is that to those people? They are the things that we want to see removed from the industry, because people should be getting what they pay for.
A number of the recommendations in this report focus on those issues around group life insurance about ensuring that people are getting clear information from the trustees of the super fund but also via the ATO, where possible, of not only what their superannuation account balances are but what insurance cover they have within their superannuation funds, because many people don't even know they have insurance cover. The fact that people have something they don't know about is, I think, a breakdown in the level of communication by the superannuation funds to educate their members about what they actually have in their fund.
One of the interesting recommendations, which I haven't seen much commentary on so far, is something that I have discussed at length with the industry over the years—this is more in the retail insurance space than in group life policy—and that is legacy products. Legacy products have been around for a long period of time. I think one company said they had a product from 1928 or something like that; that was when it was first written. So they have got these very old systems that don't talk to each other and that probably have old definitions and old terms and conditions. One of the issues we discussed was how we work with the industry to rationalise this book of legacy products and through that process ensure there is a no-disadvantage test to ensure that, where policies are moved to a new policy, the current policyholder is no worse off. This was looked at on the basis of putting people into newer products with better terms and conditions, reducing the cost of managing these complex, long-term books for the insurance company and, hopefully, reducing the long-term cost to consumers in Australia. I commend this report to the House. (Time expired)
Sitting suspended from 12 : 14 to 16 : 06