Benjamin Koh, SMH March 11, 2016
Ethics and insurance don’t go hand in hand The behaviour of Commonwealth Bank’s financial planning division was predicted several years prior in research by Dr June Smith from Victoria University.

In the thesis on Professionalism and Ethics in Financial Planning, Dr Smith showed there are numerous individual, situational and contextual predictors of ethical decision-making.

One major finding was that organisational structure contributed substantially towards ethical behaviour (or lack of) of employees.

Smith’s study supports views expressed by Linda Trevino, professor of organisational behaviour and ethics that unethical conduct in business is not simply the result of bad apples.

While research does not condone or relieve the individual violator of accountability, Trevino says those who create the environment and the organisational structure in which decision-making occurs also share responsibility.

Hierarchy encourages obedience to authority and the displacement of moral agency to superiors.

Corporations therefore have an important impact on the social norms adopted by employees through clear mandates and structural separation of the employees’ roles and reporting structures within the business.

Most of the major banks in Australia have a life insurance division. Within this sector, issues of ethics are arguably even more important.

If financial losses from unethical (or illegal) conduct of financial institutions were bad for customers, the impact on customers would be devastating when translated into the life insurance sector.

This is because such customers are at their frailest and medically most vulnerable and often are fighting for their lives. Literally.

That is why the life insurance contract is a covenant of utmost good faith and is a principle that guides all parties from the point of inception at application to the point of fulfilment in the event of a claim submission.

7227944-3x2-340x227In the life insurance environment, there is often an imbalance of information held between the insurer and the insured. Insurers often strive to maximise the accuracy of medical evidence that is obtained from claimants on the premise of avoiding fraudulent claims.
Such a goal is prudent in making the best and fairest assessment by an insurer for all policyholders by ensuring only legitimate claims are paid (and maintaining a profit for the business).

Take for example the assessment of a terminal illness claim.

7227966-3x2-340x227Under legislation, a superannuation life insurance policy with a terminal illness benefit entitles an insured person to be paid the benefit when two treating doctors certify a claimant’s condition is terminal, with a life expectancy of less than 12 months (this has recently been amended to be 24 months).

Parliament has recognised this is an assessment made by the tutored medical understanding of doctors with expertise on the illness, be it for an end-stage cancer or patients with organ failure.

In the context of life insurance, the claims assessor holds the delegated authority to determine whether to pay a claim, notwithstanding the views of the treating doctors’ expert opinions.

In the context of life insurance through a superannuation fund, the trustee has much sway in that final decision, but not being medically trained, most trustees would defer such determinations to the contracted insurer’s claims assessor. Therein lies the problem.

Few claims assessors, if any, have a medical background. So it would seem curious these nonmedical assessors wield such power.

For claimants with organ failures, some assessors assess such claims not by the dire state the claimant is in, but rather on the basis the claimant may receive an organ transplant in the future.

Such an approach is ethically untenable because a patient’s eligibility and placement on an organ transplant list is confidential and there is no guarantee of receiving an organ before death; or if an organ transplant does occur there is no guarantee of its success.

Moreover, if the purpose of a claims assessment per the insurer’s mantra is to eliminate fraudulent claims, how does it apply here? Surely one cannot fake an organ failure verified by objective biochemical results and or other clinical parameters? What the example illustrates is the real-world application of claims assessment in the life insurance industry.

Senior leaders in the financial institutions would try to blame such behaviours on ‘‘bad apples’’ and shirk all responsibility, carrying on business as usual.

Do leaders in an institution that consciously hires individuals with no relevant medical background, delegate authority of medical claim determination to medically untutored individuals, and provide no clear ethics mandate on how to uphold the spirit of utmost good faith really be without blame?

If senior leaders keep passing the buck, perhaps they should also stop keeping the big bucks.

Dr Benjamin Koh alleges he was sacked by CBA in August 2015 for being a whistleblower
In the life insurance environment the insurer normally knows more than the insured.

Originally published SMH, March 11, 2016