ASIC sues MLC Life over alleged insurance failures

The corporate regulator has launched legal action against the formerly National Australia Bank-owned life insurance business MLC Life for allegedly charging more than a quarter of a million Australians insurance premiums without paying benefits.

The Australian Securities and Investments Commission (ASIC) commenced litigation against MLC Life this week, alleging poor systems and controls resulted in $17.5 million in losses across 260,000 customers, between 1999 and November 2020.

MLC Life has already remediated impacted customers but ASIC is using the courts to fine MLC Life in an effort to force the insurer to update systems and processes and to deter systemic non-compliance throughout the industry.Credit:Arsineh Houspian

The bulk of the unpaid claims relates to MLC’s alleged failure to refund premiums to customers who had cancelled loan insurance or paid out loans and MLC’s failure to notify 800 customers their premiums had increased or were overdue.

ASIC is also prosecuting MLC’s alleged failure to appropriately compensate 297 customers undergoing rehabilitation following an insured injury or disability and a dozen who were denied payments because MLC had failed to update its definition of ‘Severe Rheumatoid Arthritis’.

MLC Life has already remediated impacted customers but ASIC is using the courts to prosecute MLC Life in an effort to force the insurer to update systems and processes and to deter systemic non-compliance throughout the industry.

ASIC deputy chair Sarah Court took the job last year and has vowed to continue using lawsuits and financial penalties to stamp out corporate misconduct. Ms Court said this case alleges long-term failures “to ensure a reliable delivery of basic and everyday insurance services”.

“Consumers should be able to trust insurers to pay their full benefit in times of need and keep them informed about significant changes to their policies,” she said.

“Insurers need to make sure they have adequate systems and controls to manage risk and administer their insurance policies correctly. Too often, we are seeing consumers harmed by implementation issues, legacy IT systems and failures resulting from poor governance and culture.”

MLC Life was owned by NAB until 2016 when the controlling stake was sold to Japanese-based Nippon Life. The insurance division is not part of the MLC wealth company bought by IOOF from NAB last year.

MLC Life acknowledged ASIC’s lawsuit in a statement “in relation to four historical breach events involving systems and control processes”.

“These events were self-reported to ASIC by MLC Life Insurance. Following our internal investigations, all impacted customers were fully compensated and the events remediated and closed,” MLC Life said.

“We take our responsibility to deliver on our customer commitments seriously. Where we fall short in doing the right thing for our customers, we communicate with them and remediate our errors promptly.”

MLC Life said it will “carefully consider” ASIC’s claims and is “is committed to working constructively through the legal process”.

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