4.3 What the case study showed

This case study showed how TAL had dealt with separate claims under three income protection policies. The claimants had different medical conditions. The case study raised several broader questions about TAL’s policies and procedures.

Much of TAL’s conduct was rightly acknowledged as problematic by TAL in the statements that it provided to the Commission, in the course of cross-examination, or in TAL’s subsequent submissions to the Commission.

4.3.1Misconduct

In relation to the first insured, TAL acknowledged on numerous occasions that it had breached its duty of utmost good faith towards the insured, breached professional standards, and engaged in conduct that was misleading.[1] These breaches all stemmed from TAL’sapproach of seeking to avoid the claim, rather than to support the insured.[2] TAL accepted that this was evidenced by numerous types of inappropriate conduct, including:[3]

  • the engagement of, and inappropriate use of, and instructions to, external investigators;
  • the excessive use of surveillance;
  • bullying tactics and offensive communications;[4]
  • misrepresentation of policy terms; and
  • misuse of the daily activities diary.

All these acknowledgments were properly made.

In relation to the second insured, TAL accepted that it may have breached its duty of utmost good faith by telling the second insured, when it avoided her contract of insurance, that she had breached her duty of utmost good faith.[5] At most, the second insured had innocently failed to disclose certain information about her medical history.[6] TAL accepted that this constituted a breach of its obligation of utmost good faith.[7] Again, the concession was properly made.

I also consider TAL’s broader concession about such communications to have been appropriately made. Until early 2017, TAL’s standard practice was to tell policyholders whose contracts were being avoided under section 29 of the Insurance Contracts Act that they had breached their duty of good faith.[8] TAL accepted that when it made this allegation against a policyholder in respect of an innocent non-disclosure, TAL breached its duty of utmost good faith to that policyholder.[9] In its written submissions, TAL said that there weresomething less than 497 [cases] over a four year periodin which such allegations were made.[10]

In the course of Senior Counsel Assisting’s closing address, I raised for consideration whether TAL’s misleading and incorrect statement to FOS in relation to the first insured namely, that the use of a daily activities diary was standard practice in the industry was capable of constituting a breach of the contract between FOS and TAL, and therefore, misconduct.[11] As TAL has conceded,there is no doubt an implied term of the contract between TAL and FOS that TAL would not knowingly make misrepresentations calculated to lead FOS into error.[12] Despite this, TAL submitted that it did not breach that term because the misleading statement was accompanied by a concession that TAL would no longer require the first insured to complete the diary.[13] I am not persuaded by this argument. The fact that TAL told FOS that it had decided not to press the first insured to complete the diary (a decision it later reversed),[14] does not alter the misleading character of its statement about standard practice in the industry. In any event, irrespective of the contractual position, the statement about industry practice may well have been ‘misleadingordeceptivein the sense described in the Commission’s Terms of Reference, and if that was so, it would have been misconduct on this basis alone.

I refer TAL’s conduct to ASIC, pursuant to paragraph (a) of the Commission’s Terms of Reference, for ASIC to consider what action it can and should take.

I also raised for consideration whether TAL’s actions may have worsened the medical condition of the first insured, and whether this may constitute misconduct or conduct that fell below community standards and expectations.[15] TAL submitted that no such finding was open, because the most recent psychiatric report in evidence did not attribute to TAL anyresponsibility for the observed decline in the First Insured’s mental health.[16] This is unsurprising: the focus of the report was not on identifying causes of the first insured’s condition.[17] However, the report did make clear that there was a marked deterioration in the first insured’s condition over the period of her engagement with TAL, and that the first insured had expressedfearfulness and anger which was directed towards the insurance process.[18]

Ms van Eeden accepted that TAL’s actions towards the first insured were capable of causing her considerable distress,[19] and that TAL failed to properly acknowledge her distress in some significant respects.[20] I doubt that all of TAL’s conduct towards the insured is properly characterised as TAL would have it – [21] as no more than TAL exercising rights it had under the insurance contract. Even if the conduct can be connected to TAL’s contractual rights, the manner in which TAL exercised those rights may have exacerbated the first insured’s condition. I consider that TAL’s conduct fell below community standards and expectations.

4.3.2Conduct falling below community standards and expectations

TAL’s conduct fell below community standards and expectations in a number of other respects.

First, until 2017, TAL did not have adequate systems to train its case managers, or to oversee the actions of its case managers. In its statements and its submissions to the Commission, TAL accepted that this finding was open.[22] In the case of the first and third insureds, this resulted in a number of inappropriate actions being taken, and a failure by TAL to correct those decisions in a timely manner.[23]

Second, at least until 2016, TAL did not have robust systems to avoid potential conflicts of interest. This is demonstrated by reference to two specific examples.

In the case of the first insured, TAL permitted a case manager to sit on the Claims Decision Committee when the Committee was reviewing that manager’s recommendation. In its written submissions to the Commission, TAL accepted that this fell below community standards and expectations, because the Committee’sdecision-making should have been independent from the case manager.[24] I agree.

In the case of the third insured, TAL remitted claims to case managers after TAL’s IDR team had essentially indicated that the case manager had taken the wrong approach.[25] In the course of cross-examination, Ms van Eeden accepted that it was inappropriate toremit[ ] a decision of the internal dispute resolution body to the person who has been found by them to have engaged in poor conduct.[26] Despite this acceptance, TAL submitted that the practice did not fall below community standards and expectations, because it would not have been readily foreseeable during the period that the practice was employed that it wasprejudicing the independence of the process.[27] To my mind, Ms van Eeden’s concession was appropriate, and TAL’s submission does not convince me to the contrary.

The third way in which TAL’s conduct fell below community standards and expectations was its failure to have adequate systems in place to ensure that its IDR team conducted a robust analysis of declined claims, in a way that was independent of the claims team.[28] In its written submissions, TAL accepted that its IDR team did not undertake a robust review of the decision to avoid the first insured’s policy, but said that the evidence did notsupport a finding that there existed a systemic failure by the IDR team to conduct robust review of declined claims.[29] However, in Ms van Eeden’s statements to the Commission, and under cross-examination, Ms van Eeden recognised that the IDR team had beenembedded within the operational functions of TAL, that the team wasnot located in a way that enhanced any independence, and that the team wasnot sufficiently independent of the businessat the time that the first insured made her claim.[30] In my view, these acknowledgments show that TAL’s IDR team was not set up in a way that promoted robust analysis of declined claims, independent of the claims team.[31] And the fact is that TAL’s IDR team did not make a robust analysis of the first insured’s declined claim.

The fourth way in which TAL’s conduct fell below community standards and expectations concerned its engagement with FOS. In its submissions, TAL accepted that it failed to engage with FOS in a frank and cooperative way in a number of respects, and that this was conduct that fell below community standards and expectations.[32] As noted above, TAL made a misleading and incorrect statement to FOS in relation to the first insured, namely that the use of a daily activities diary was standard practice in the industry;[33] TAL delayed in communicating to FOS the additional basis on which it was relying to avoid the second insured’s policy;[34] TAL refused to participate in a conciliation conference with the first insured;[35] and TAL in some respects failed to comply with FOS’s decisions in respect of the first insured in a timely manner, or in some instances, until pushed by FOS to do so.[36] In my view, TAL was right to accept that each of these instances involved conduct that fell below community standards and expectations.

Fifth, historically, TAL failed to afford policyholders an opportunity to address TAL before it avoided their policies.[37] Until mid-2017, TAL generally failed to afford policyholders including the second and third insureds an opportunity to address TAL, and the material that TAL was relying upon, prior to TAL deciding to avoid their policy.[38] Both in Ms van Eeden’s statement and in TAL’s submission to the Commission, it was accepted that this conduct fell below community standards and expectations.[39]

The sixth way in which TAL’s conduct fell below community standards and expectations concerned TAL’s communications with its policyholders. As acknowledged by TAL, several aspects of TAL’s communications with the first, second and third insureds fell below community standards and expectations. In relation to the first insured, TAL accepted that it communicated in a way that was inappropriate, bullying, threatening and misleading.[40] In respect of the second and third insureds, TAL accepted that it failed to communicate in a sensitive and empathetic way that recognised the difficult circumstances that they were facing[41] (for example by telling the second insured that she may have to repay the benefits that she had obtained under the policy).[42]

The seventh way in which TAL’s conduct fell below community standards and expectations concerned TAL’s systems and processes. TAL made a number of administrative errors in respect of the first insured’s case, including erroneously notifying her that her policy would be cancelled for non-payment of premiums.[43] As is apparent from what I have said, these errors continued after Ms van Eeden gave evidence.[44] Ms van Eeden acknowledged that these types of errors could have been a significant stressor for someone in the first insured’s position, and could have impacted on her health.[45] TAL accepted, and I agree, that these errors constituted conduct that fell below community standards and expectations.[46]

4.3.3Causes of the conduct

TAL accepted that a cause of much of the conduct referred to above was inadequate training and oversight of TAL case managers.[47] Ms van Eeden accepted that at the time when the three claims were made 2010, 2014 and 2015 there was minimal oversight within TAL of its senior case managers.[48] In addition, there were no structured ongoing training programs, nor any mandatory induction, at least in relation to TAL’s claims philosophy.[49] Ms van Eeden acknowledged that this was a serious flaw in TAL’s systems.[50]

Another likely cause was the culture of TAL at the time that the claims were made. Ms van Eeden said that she was unable to speak to TAL’s general culture during that period, as she was not employed by TAL at the time.[51] However, Ms van Eeden accepted that that there were multiple employees of TALinvolved in extremely poor conduct across [the] three files over different periods of time.[52] These included people at a number of levels of the business, from the claims team, the IDR team and the EDR team.[53] Ms van Eeden accepted that the fact that there wereso many problems with so many people involved over such a lengthy period of time [was] quite telling [in terms of] TAL’s culture.[54] To my mind, the matters raised by TAL in its written submissions do not detract from this.[55]

A further cause of the conduct was a lack of independence in some parts of TAL’s decision-making processes.[56] This was illustrated by TAL permitting a case manager to sit on the Claims Decision Committee when the Committee was reviewing that case manager’s recommendation,[57] TAL’s willingness to remit claims to case managers after its IDR team had essentially indicated that the case manager had taken the wrong approach,[58] and TAL historically having structured its IDR team and EDR team in a way that did not enhance their independence from TAL’s business.[59]

Finally, TAL’s conduct towards FOS indicates a culture within at least some parts of TAL that, at least at that time, had inadequate respect for FOS.[60]


[1]Exhibit 6.180, Witness statement of Loraine van Eeden, 5 September 2018, 278 [188]–[189(a)]; Transcript, Loraine van Eeden, 14 September 2018, 57478; TAL, Module 6 Case Study Submission, 13 [4]–[5].

[2]TAL, Module 6 Case Study Submission, 1 [4].

[3]TAL, Module 6 Case Study Submission, 12 [4]; Exhibit 6.180, Witness statement of Loraine van Eeden, 5 September 2018, 278 [188]–[189(a)].

[4]See also Transcript, Loraine van Eeden, 13 September 2018, 5718, Transcript, Loraine van Eeden, 14 September 2018, 5748.

[5]Transcript, Loraine van Eeden, 14 September 2018, 5772.

[6]Transcript, Loraine van Eeden, 14 September 2018, 57712.

[7]Transcript, Loraine van Eeden, 14 September 2018, 5772; TAL, Module 6 Case Study Submission, 3 [6].

[8]Transcript, Loraine van Eeden, 14 September 2018, 5772; TAL, Module 6 Case Study Submission, 3 [7].

[9]Transcript, Loraine van Eeden, 14 September 2018, 5772; TAL, Module 6 Case Study Submission, 3 [7].

[10]TAL, Module 6 Case Study Submission, 4 [8]; see also Exhibit 6.179, Witness statement of Loraine van Eeden, 31 August 2018, 23 [11].

[11]Transcript, Commissioner, 21 September 2018, 6483; see also Transcript, Loraine van Eeden, 13 September 2018, 5721.

[12]TAL, Module 6 Case Study Submission, 12 [40(a)].

[13]TAL, Module 6 Case Study Submission, 1213 [40(a)].

[14]TAL, Module 6 Case Study Submission, 11 [35].

[15]Transcript, Commissioner Hayne, 21 September 2018, 6484.

[16]TAL, Module 6 Case Study Submission, 7 [22].

[17]Exhibit 6.202, 13 July 2017, Report of Dr Anthony Dinnen.

[18]Transcript, Loraine van Eeden, 14 September 2018, 57556; Exhibit 6.202, 13 July 2017, Report of Dr Anthony Dinnen.

[19]Transcript, Loraine van Eeden, 13 September 2018, 5687, 5726; Transcript, Loraine van Eeden, 14 September 2018, 5756.

[20]Transcript, Loraine van Eeden, 14 September 2018, 5761.

[21]TAL, Module 6 Case Study Submission, 8 [23].

[22]Exhibit 6.180, Witness statement of Loraine van Eeden, 5 September 2018, 30 [193]–[194]; TAL, Module 6 Case Study Submission, 8 [25].

[23]Transcript, Loraine van Eeden, 14 September 2018, 5785; TAL, Module 6 Case Study Submission, 89 [25].

[24]TAL, Module 6 Case Study Submission, 9 [27].

[25]Transcript, Loraine van Eeden, 14 September 2018, 5782.

[26]Transcript, Loraine van Eeden, 14 September 2018, 5782.

[27]TAL, Module 6 Case Study Submission, 10 [29].

[28]Transcript, Loraine van Eeden, 13 September 2018, 56901; Transcript, Loraine van Eeden, 14 September 2018, 5760.

[29]TAL, Module 6 Case Study Submission, 11 [33].

[30]Transcript, Loraine van Eeden, 14 September 2018, 5760; see also Exhibit 6.180, Witness statement of Loraine van Eeden, 5 September 2018, 29 [190(a)], 30 [195].

[31]Transcript, Loraine van Eeden, 13 September 2018, 56901; Transcript, Loraine van Eeden, 14 September 2018, 5760.

[32]TAL, Module 6 Case Study Submission, 11 [34].

[33]TAL, Module 6 Case Study Submission, 11 [35]; see also Transcript, Loraine van Eeden, 14 September 2018, 5758.

[34]TAL, Module 6 Case Study Submission, 11 [36]; see also Transcript, Loraine van Eeden, 14 September 2018, 5778.

[35]TAL, Module 6 Case Study Submission, 11 [37]; see also Transcript, Loraine van Eeden, 14 September 2018, 5741.

[36]TAL, Module 6 Case Study Submission, 11 [38]; Transcript, Loraine van Eeden, 13 September 2018, 56978, 5700, 5702; Transcript, Loraine van Eeden, 14 September 2018, 5745, 5761.

[37]Transcript, Loraine van Eeden, 14 September 2018, 57701, 5784.

[38]TAL, Module 6 Case Study Submission, 13 [41].

[39]Exhibit 6.179, Witness statement of Loraine van Eeden, 31 August 2018, 278 [106], 29 [113(c)]; TAL, Module 6 Case Study Submission, 13 [41].

[40]Transcript, Loraine van Eeden, 13 September 2018, 5717–18; Transcript, Loraine van Eeden, 14 September 2018, 5748; Exhibit 6.180, Witness statement of Loraine van Eeden, 5 September 2018, 279 [188]–[189]; see also TAL, Module 6 Case Study Submission, 14 [42].

[41]Exhibit 6.179, Witness statement of Loraine van Eeden, 31 August 2018, 27 [103]; Transcript, Loraine van Eeden, 14 September 2018, 5784.

[42]Transcript, Loraine van Eeden, 14 September 2018, 5770; see also TAL, Module 6 Case Study Submission, 14 [43(b)]. TAL made a similar statement to the first insured: see Transcript, Loraine van Eeden, 13 September 2018, 5726 and Transcript, Loraine van Eeden, 14 September 2018, 57324.

[43]Transcript, Loraine van Eeden, 14 September 2018, 5757.

[44]Exhibit 6.483, 23 October 2018, Letter TAL Missed Premium Payments 19092018.pdf.

[45]Transcript, Loraine van Eeden, 14 September 2018, 5761.

[46]TAL, Module 6 Case Study Submission, 1415 [44].

[47]TAL, Module 6 Case Study Submission, 15 [46].

[48]Transcript, Loraine van Eeden, 14 September 2018, 5759; see also TAL, Module 6 Case Study Submission, 15 [46(c)].

[49]Transcript, Loraine van Eeden, 14 September 2018, 5759; Exhibit 6.180, Witness statement of Loraine van Eeden, 5 September 2018, 30 [194]; TAL, Module 6 Case Study Submission, 15 [46(a)(b)].

[50]Transcript, Loraine van Eeden, 14 September 2018, 5760.

[51]Transcript, Loraine van Eeden, 14 September 2018, 5736.

[52]Transcript, Loraine van Eeden, 14 September 2018, 5737.

[53]Transcript, Loraine van Eeden, 14 September 2018, 5737, 5758, 57734, 57856.

[54]Transcript, Loraine van Eeden, 14 September 2018, 5785.

[55]TAL, Module 6 Case Study Submission, 1618 [47]–[54].

[56]TAL, Module 6 Case Study Submission, 1819 [56]–[58].

[57]TAL, Module 6 Case Study Submission, 9 [27].

[58]Transcript, Loraine van Eeden, 14 September 2018, 5782.

[59]Transcript, Loraine van Eeden, 14 September 2018, 5760.

[60]Cf TAL, Module 6 Case Study Submission, 18 [55].