On Wednesday afternoon, Commonwealth Bank provided another lesson in picking your battles when a squabble over less than $100,000 ended up costing so much more.
The executive general manager of the bank’s insurance division, CommInsure, Helen Troup, was grilled over a life and trauma insurance policy holder who suffered a heart attack in January 2014.
He went into hospital and later claimed on his insurance for two things: a heart attack and a coronary artery angioplasty.
CBA refused the first claim – which would have resulted in a $100,000 payout – under the definition of heart attack it had in place at the time. The second claim was accepted, with a much smaller payout of around $10,000.
But then in March 2016, a joint investigation by The Australian Financial Review’s columnist Adele Ferguson and ABC Television’s Four Corners revealed issues with CommInsure using outdated medical definitions, including for heart attacks.
In response, CBA announced it would update those definitions, and backdate its new heart attack definition to May 2014. Many apologies, must do better, moving on.
But having seen the media reports, our heart attack victim takes a complaint to the Financial Ombudsman Service, suggesting CommInsure should look at his heart attack claim again.
CommInsure gets its doctor to take another look and rejects the claim again on the grounds that the man’s heart attack occurred in January 2014, three months before the now backdated policy came into effect.
But the doctor also takes a look at whether the claim would have been paid under the updated definition. He confirms it would have been.
And thus CBA starts what can only be described as a game of funny buggers with the Financial Ombudsman Service through mid to late 2016.
After hearing that CBA has again rejected the man’s claim, the Ombudsman tells CBA to provide medical reports explaining its decision.
It also – crucially – suggests the CBA should assess the victim’s claim against its updated definition.
CBA is taken aback by this, with one staff member suggesting the Ombudsman was shifting the goalposts on its contract terms in a way that could post a “systemic risk” for the business.
“A tenement of our polices are the contact, and so if FOS could determine when to apply a definition from, that would make it fairly challenging for us to run our business,” Troup told the senior counsel assisting the commission, Rowena Orr, QC, by way of explanation.
So CBA pushes back. It challenges the jurisdiction of the Ombudsman, but its argument is rejected immediately. Despite this, CBA makes the argument again – twice.
The bank then provides the medical evidence behind its rejection. But incredibly, it doesn’t let the Ombudsman know it has completed the second medical opinion that would have approved the claim.
Instead, it redacts the second opinion from the document it returns to FOS.
“This email to FOS was misleading, was it not?” Orr asked Troup.
After much back and forth – including CBA refusing to explain the redaction, in contravention of ASIC guidelines – FOS eventually accuses CBA of “serious misconduct” in its handling of the case.
You will be shocked to hear CBA rejected this characterisation at the time. But FOS wasn’t persuaded back then and nor was Orr in the commission on Wednesday.
Troup agreed with Orr that the bank had engaged in misconduct and admitted the decision had damaged FOS’ trust in the bank.
CBA had a point about FOS’ jurisdiction, and its argument that FOS’ action could have weakened its contract terms was a reasonable one to make.
But refusing to accept the umpire’s initial decision was silly. The misleading redaction beggars belief.
In the end, CBA did make an ex gratia payment to the poor old heart attack victim – call it $90,000.
Which, of course, is likely just a portion of the amount CBA spent on the massive squad of lawyers and support staff in the commission on Wednesday.