By business reporter Andrew Robertson
Updated April 29, 2016 13:30:18
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Map: Australia
Eight years ago, restaurateur Jackie Milijash went to her local Commonwealth Bank branch to tell them her business had changed address.
It was not until 2014 that she found out the true cost of that visit.
"I said, I am sorry, I haven't worked for nearly two months now. I am now about to have a serious operation and I said, I've got income protection insurance, and they said, no, no, no, you're not covered," she told ABC TV's The Business.
Whilst at the bank in 2008, Jackie Milijash said she was persuaded by the branch's financial planner to cancel her existing insurances, including a long-standing income protection policy with another company, and switch to insurance sold by him.
The policies included trauma insurance, but not income protection.
"I said, but where's my income protection? He said, no, no, no. That's what we now call trauma protection," she said.
Independent financial advisor Suzanne Haddan, from BFG Financial Services, noted that there is a big difference between trauma insurance and income protection insurance.
"Trauma only covers a limited amount of diagnosed events. So you may be off work for illness which isn't covered by trauma, so you wouldn't be entitled to any payment," she explained.
Insurers, banks trying to move away from income protectionIncome protection has been a big loser for insurance companies in recent years, and their response has included raising premiums and taking a tougher approach to claims.
Cases such as that of Jackie Milijash also give the impression they are doing their best to avoid putting people into income protection.
"In my experience, the process is looking for reasons to decline claims, as opposed to looking at it objectively," said Carl Mickels, a senior solicitor at Firth's lawyers in Sydney.
Mr Mickels earns his living trying to force insurance companies to honour their obligations to customers.
He argued they are too focussed on the bottom line, without any regard for the wellbeing of people who are relying on their insurance in a time of often desperate need.
"I find that quite regularly on claims that have been paid for two or three years, all of a sudden, out of the blue they'll receive, the insured will receive, a letter from their insurer, setting aside their policy, cancelling the policy," he added.
Which then results in a costly legal battle to get their payments restored.
"When you add the financial, the physical pain, and the never ending delay in reaching a decision by the insurer, it's unbearable to them at times," Mr Mickels observed.
'At best incompetent, at worst fraudulent'Jackie Milijash's statement of advice, which is a summary of the products sold to her by Commonwealth Bank in 2008, makes interesting reading.
It reads that, after discussions with Jackie Milijash, "our advice may not be appropriate for your particular financial situation."
Despite those concerns, CBA still went ahead and sold her insurance that did not meet her needs, and the employee driving those sales pocketed a $4,000 commission.
What Jackie Milijash did need was income protection.
BFG's Suzanne Haddan said it is a case that raises alarm bells.
"I have to question whether the advice giver understood and knew their client, and were they operating in the best interest of their client," she commented.
In 2008, which was before the "best interest test" was introduced, financial planners were expected to know their client, know the products they sold, and have a reasonable basis for recommending them.
Those are things that appeared to be lacking with the advice given to Jackie Milijash.
"At best that's being incompetent, at worst it's being fraudulent and deceitful," said Ms Haddan.
Mr Mickels expressed similar sentiments.
"In my opinion, that financial adviser would be negligent and, if he was an employee of the bank, they would be vicariously liable for the conduct," he said.
Commonwealth Bank responseThe Commonwealth Bank declined the opportunity to be interviewed.
However, it sent the ABC a statement saying that it cares "deeply about providing the best service to our customers".
"The CBA Group is committed to ensuring that at all times its advisers act in our customers' best interests and, where that has not happened or where we identify that the advice provided to customers did not meet the requirements of appropriateness and reasonableness, we will take action to address our customers' concerns," the bank responded.
"If any of our customers have questions or concerns about their CommInsure policies, they are encouraged to contact us directly on 1800 106 133.
"Options are available in cases where customers are dissatisfied with an outcome or wish to make a complaint about the advice received.
"Free and independent external dispute resolution can be accessed through the Financial Ombudsman Service on 1800 367 287."
Topics: banking, consumer-finance, consumer-protection, insurance, australia
First posted April 28, 2016 16:37:51
