Federal Court Orders MLC to Pay $10 Million Penalty for Failure to Deliver Promised Rehabilitation Benefits
Justice Mark Moshinsky attributes the conduct to MLC’s inadequate administration of insurance policies, stating a lack of “appropriate processes and procedures.”
During the penalty period from November 18, 2015, to October 31, 2018, the insurer neglected to timely pay a sum of $2.06 million in bonus benefits to 119 policyholders who had presented evidence of satisfactory participation in an approved rehabilitation program.
As part of the penalty, Justice Moshinsky mandated that MLC publish an adverse publicity notice on its website.
MLC acknowledged the contravention allegations made by the Australian Securities and Investments Commission (ASIC) during the legal proceedings.
According to ASIC Deputy Chair Sarah Court, the regulatory body will persist in taking action against insurers that fail to uphold their duty of utmost good faith towards customers.
Ms. Court expressed the expectation that customers can rely on their insurer to fulfill promised benefits and provide clear communication regarding any policy changes.
The Court’s acknowledgment of the failings highlights issues stemming from inadequate governance, controls, and systems, including outdated IT systems. Ensuring proper administration of insurance policies is imperative for MLC customers.
MLC’s failure extended to insufficient training and monitoring of staff concerning customer communications regarding policy administration, encompassing policy schedules and premium notices.
Apart from the $10 million penalty, MLC has offered approximately $11.8 million in remediation to around 1,000 affected customers.
MLC voluntarily reported the breaches and, prior to initiating legal proceedings, proactively contacted affected customers to apologize and offer remediation.
MLC, a prominent insurance company, has been fined $10 million by the Federal Court due to its failure to fulfill promised rehabilitation benefits to over 100 eligible policyholders. The penalty was imposed as a result of MLC’s lack of appropriate processes and procedures in administering its insurance policies.
During the penalty period from November 18, 2015, to October 31, 2018, MLC neglected to pay a total of $2.06 million in bonus benefits to 119 policyholders who had provided satisfactory proof of participation in approved rehabilitation programs. This failure occurred within an unreasonable timeframe.
Justice Mark Moshinsky, who presided over the case, ordered MLC to publish an adverse publicity notice on its website, highlighting the company’s misconduct. MLC acknowledged the contraventions raised by the Australian Securities and Investments Commission (ASIC) during the legal proceedings.
ASIC Deputy Chair Sarah Court emphasized that the regulator will continue taking action against insurers who fail to fulfill their duty of utmost good faith towards customers. Customers should be able to trust that insurers will honor their commitments and keep them adequately informed about policy changes.
MLC’s failure was attributed to poor governance, controls, and systems, including outdated IT systems. It also came to light that MLC had not sufficiently trained and monitored its staff regarding customer communications related to policy administration.
MLC has not only faced a $10 million penalty but has also taken steps to provide remediation of around $11.8 million to approximately 1,000 affected customers.
The company self-reported the breaches, took proactive measures to reach out to affected customers, apologize for the failures, and offer appropriate compensation before the legal proceedings commenced.
Source : insurancenews.com.au