Life insurer slammed with $10 million penalty

Life insurer slammed with $10 million penalty | Insurance Business Australia

Insurance News

Life insurer slammed with $10 million penalty

One thousand customers impacted, millions in remediation costs

Insurance News

By
Daniel Wood

The Federal Court has ordered the life insurance company MLC Limited (MLC) to pay a $10 million penalty for failing to pay promised benefits. According to a media release from the Australian Securities and Investments Commission (ASIC), the penalty comes on top of remediation costs of almost $12 million impacting about one thousand customers.

The Court said MLC Life Insurance contravened three financial services Acts: the ASIC Act, the Corporations Act and the Insurance Contracts Act.

“The failings recognised by the Court are the result of poor governance, poor controls and poor systems, such as legacy IT systems,” said ASIC Deputy Chair Sarah Court. “MLC customers deserve to have their insurance policies administered properly.”

The firm sold life insurance policies providing coverage for income protection, critical illnesses and other personal risks.

The release said the “failures” include not paying a rehabilitation benefit to 119 customers who undertook approved rehabilitation programs, not having adequate processes to update medical definitions and not adequately training staff.

“Customers should be able to trust that their insurer will pay the benefits promised to them and keep them properly informed if there are changes to their policies,” said Court.

The Court has also ordered MLC to publish an adverse publicity notice on its website.