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Combined Insurance: critics say it’s tip of iceberg

Fraud allegations against Combined Insurance have led to consumer groups suggesting fraudulent sales practices could be endemic within the insurance industry.

A former employee of Combined, the Australian operations of which were merged with Ace in 2010, has alleged agents desperate to maximise commissions systematically duped customers, including vulnerable Australians.

Whistleblower Alison Moore told Fairfax Media people were sold policies they did not need and information such as medical histories was deliberately omitted, effectively making the cover worthless.

She says some agents also engaged in “tombstoning”, where dead or imaginary clients were signed up and initial premiums were paid by the agents because the commissions were worth more.

Ms Moore, who worked with Combined for more than a decade, claims some senior managers backed the conduct and those caught were not punished.

The allegations relate to income protection policies covering accident or sickness, which are general insurance products.

The Australian Securities and Investments Commission (ASIC) is investigating, and Combined Insurance Global President Brad Bennett has flown in from the US.

The Financial Rights Legal Centre told such practices could run deep within the industry.

“In our view, where an insurance company has a distribution model reliant on commissions and conflicted remuneration, the risk is high that consumers may be the subject of misleading information and poor sales practices,” solicitor Alexandra Kelly said.

“We do not think these practices are limited to Combined Insurance, and suspect they are endemic.”

Ms Kelly says ASIC needs greater powers, including being able to limit certain remuneration models.

“Conflicted remuneration is not just a problem in life insurance, but can also drive poor practices and consumer outcomes in general insurance,” she said. “Insurers should be required to ensure a basic level of suitability to their customer of the products they sell.”

The Consumer Action Law Centre says the revelations should not come as a surprise to anyone.

“Where you are paying large commissions, it is going to lead to some really unsavoury sales practices,” Senior Policy Officer David Leermakers told

“The ball is back in the court of the insurance industry and it’s up to it whether it is willing to recognise that commissions are creating bad outcomes for customers, but also their brands.”

The Financial Rights Legal Centre says it is currently working with a Pacific Islander who was sold a policy by a Combined representative who visited his house.

The man, who does not want to be identified, bought what he believed was a life insurance policy and cancelled other coverage as a result.

About two years later he suffered a fall and within a few days was unable to walk.

However, doctors could not say conclusively that the fall caused his condition, and his insurance claim was denied because he had in fact bought an accident policy, which specifically excludes illness.

“This man may have potentially forgone a more suitable product for a product that would limit his benefits,” Ms Kelly said.

Head of Combined Insurance Asia-Pacific Chris Carey says cover is sold primarily by local agents who meet with customers personally.

“We are troubled and concerned to learn when any of our customers have not been treated appropriately by one of our representatives,” he said in a statement.

“Combined has extensive compliance systems and processes in place to protect its customers and to ensure we treat every customer fairly, fulfil our obligations to pay claims and remain fully compliant with both the letter and the spirit of the law.”

He says compliance processes have been enhanced and the company will work with ASIC to determine whether additional changes are necessary.

The Insurance Council of Australia (ICA) told it cannot comment on the activities of individual insurance companies.

“Once the outcome is known of ASIC’s investigation, ICA will consider whether there are any systemic issues for general insurers that may need to be addressed,” a spokesman said.

Slater & Gordon says customers who believe they have had a Combined Insurance claim unfairly rejected should contact the law firm.

“If a customer told an employee or agent of Combined Insurance information about their medical history or income, but that information was not included in the insurance application, Combined Insurance is deemed to know that information,” it said.

“Unfortunately, we see cases like this regularly. They are not limited to Combined Insurance.”

ASIC declined to comment on its investigation, and Ace refused to answer specific questions or add anything to Mr Carey’s statement.