• ASIC wanted CBA’s CommInsure to acknowledge that its advertising was deceptive and misleading.
• But CommInsure got ASIC to change a media release so that the insurer made no admissions.
• The maximum fine for the four misleading advertisements was $8 million but CommInsure paid just $300,000.

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The Commonwealth Bank’s CommInsure got the corporate regulator, ASIC, to change the wording on a media statement so that it didn’t admit being deceptive in its advertising about insurance coverage for heart attacks, the financial services royal commission was told today.

ASIC said that the advertisements may have led a policyholder to believe they would be entitled to a lump sum payment if they suffered a heart attack, when only certain types of heart attacks, which met certain medical criteria, were covered.

Wording from ASIC that CommInsure acknowledged that the advertising may have been “misleading and deceptive” was removed from the draft media release.

The commission heard of emails between James Myerscough, the Commonwealth’s wealth management chief risk officer, and ASIC’s leader Tim Mullaly about the media release.

ASIC wanted CommInsure to acknowledge that the advertising statements may have been “misleading and deceptive.”

CommInsure suggested: “CommInsure acknowledged prior to March 2016 ASIC’s concerns could be reasonably held.”

In the final media release, CommInsure made no admissions but agreed to pay $300,000 towards a consumer advice service and have its advertising sign-off processes independently reviewed.

The royal commission heard that the maximum fine for the four misleading advertisments was $8 million. These are criminal offences under the Australian Securities and Investments Commission Act.

Previous evidence at the commission detailed how ASIC decided CommInsure had not broken the law when denying a heart attack victim a life insurance payout on the basis of an outdated definition of the medical condition.

A joint investigation by Fairfax Media and the ABC’s Four Corners exposed the rejection of claims by CommInsure on the basis of outdated definitions of various medical conditions.

Helen Troad, the managing director of CommInsure, agreed under questioning in the commission that she was pleased at the result of the ASIC investigation.

“There were some extremely serious allegations made against CommInsure on the Four Corners program and they were found to be unsubstantiated and that was a very good outcome for CommInsure,” she said.

ASIC found that CommInsure had trauma policies with medical definitions that were out of date with prevailing medical practice, specifically for heart attack and severe rheumatoid arthritis.

However, ASIC said this wasn’t against the law. An insurer can set out the level of cover its policy provides, including out of date medical definitions, as long as these are clearly disclosed.

CommInsure has since updated its medical definitions, including for heart attack and severe rheumatoid arthritis, along the lines of international standards.

Under question by Rowena Orr, senior counsel assisting the commission, Troup admitted that CommInsure knew from 2012 that its definition wasn’t the same as the universal definition of a heart attack.

Orr asked: “Would customers believed the cover applies to all heart attacks?”

Troup: “Yes.”

She also agreed that CommInsure didn’t to update the medical definitions for commercial reasons.

Today the commission heard about another case, a woman who had surgery to remove breast cancer who was denied a payout by Comminsure, relying on an 18-year-old medical definition, saying the surgery wasn’t radical enough.

She had a portion of her breast tissues removed, not the entire breast.

CommInsure refused the claim despite two doctors saying she had had radical breast surgery.

The Financial Ombudsman Service found in favour of the woman and CommInsure had to pay out $169,305 plus interest.

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