Customer Rehabilitation Benefits
The court disclosed that MLC did not deliver rehabilitation benefits to 119 customers who had undergone approved rehabilitation programs post-injury or disability. This failure meant that MLC had not provided the benefits to which their clients were entitled. The court found that MLC's inadequate systems and controls resulted in customers not receiving the assistance they needed when filing for insurance claims.
Medical Definitions for Critical Illnesses
The court also found that MLC lacked adequate procedures for reviewing and updating its medical definitions for critical illnesses in specific policies. This failure impacted the claims application process and could have exposed individuals to unfair advantage. It is noteworthy that regulating agencies recognized this challenge and warned MLC to improve its procedures.
Communication Policy
The third area of failure was MLC's inability to monitor staff in terms of communicating with clients regarding the administration of their policy, including policy schedules and premium notifications. The regulatory body expressed concern that clients were not receiving adequate information about policy benefits and thus were uninformed about possible policy changes that could affect their insurance coverage.
ASIC Deputy Chair, Sarah Court, attributed the shortcomings identified in the case to poor governance, controls, and systems, such as substandard legacy IT systems. She emphasized that ASIC would not tolerate insurers who failed to fulfill their duty of utmost good faith towards their clients, and that the agency would continue to take action against any that did not.
The Lesson
The MLC case is significant because it is a cautionary tale of how failing to treat customers fairly can seriously damage a business and lead to significant penalties, adversely impacting a company's reputation and financial standing. It is easily avoidable by implementing a culture that values customer service and communication.
MLC has since provided approximately $11.8M in remediation to approximately 1,000 impacted customers. The company has also moved to update its systems, leading to an improvement in customer satisfaction.
Thus, the MLC case provides a valuable lesson in how policies and procedures can make a massive difference in treating customers fairly and promoting good governance. Failure in these areas can lead to loss of reputation, financial penalties, and even the revocation of a company’s operating license. Hence, it is crucial that financial institutions proactively develop systems that not only benefit themselves but also protect the interests of their clients.
