Australian insurer hired a private eye to survey mentally ill woman

SYDNEY (Reuters) - An Australian life insurer paid a private investigator who covertly filmed a mentally-ill woman eating breakfast, holding hands with her partner and undressing at a swimming pool in a bid to find evidence to avoid paying her claim, an inquiry into finance sector misconduct heard last week.

TAL Services Ltd, owned by Japan’s Dai-ichi Life Holdings Inc, said it also made the woman keep a daily diary of her activities so it could find reasons to minimise its payments to her, a requirement that ultimately drove her to self-harm.

The account of surveillance made for a day of explosive evidence at the inquiry which has turned its sights to the insurance sector after rocking the consumer credit, rural lending, small business banking and pension sectors with allegations of misconduct.

TAL general manager Loraine van Eeden told the inquiry the company paid the investigator A$20,000 ($14,360) to surveil the woman for two and a half weeks, morning to night, including visiting her house and watching her hike, swim, hold hands with her partner, give a talk at a library and eat at her local pizza shop.

Inquiry lawyer Rowena Orr quoted the investigator’s report as saying the woman “displayed a happy, confident, carefree demeanour ... showing no outward signs of her alleged psychological condition”.

Orr added: “There is content about the insured having to remove her clothing to swim at the pool. The insured had no idea that the private investigator was following her around town, taking videos.”

Van Eeden said the company had hired the investigator to avoid paying the woman, who had anxiety and whose name was not made public at the inquiry, about A$2,000 a month, and that “it’s not how to treat any claimant”.

It was only after the woman provided a doctor’s certificate declaring that the daily diary required by the company was driving her to self-harm that TAL told the woman about the surveillance. It ended her policy and demanded that she return A$69,000 in payments for claims, the inquiry heard.

The inquiry heard earlier that Australia’s corporate regulator allowed the life insurance arm of Commonwealth Bank of Australia to make a A$300,000 community donation when it could have faced a fine of A$8 million for misleading advertising.

The Australian Securities and Investments Commission (ASIC) also let CBA’s CommInsure suggest edits to a media announcement about the potentially misleading ads to remove any admission that the company had misled customers, the inquiry heard.

CommInsure’s executive general manager, Helen Troup, told the inquiry the regulator had asked in a series of 2017 emails if a A$300,000 “community benefit payment” would resolve its concern that the insurer had failed to disclose the limits of its heart attack coverage in advertising pamphlets.

“We would have taken the approach of continuing to defend our position, so this was alternative,” Troup said.

Kenneth Hayne, the retired judge running the Royal Commission, asked if Troup considered the payment a sufficient punishment.

She replied: “I think we felt that the A$300,000 community benefit payment was a form of punishment.”

Troup said she did not remember how the A$300,000 figure was arrived at. When Hayne asked if the amount seemed small, Troup replied: “That’s probably for other people to judge.”

ASIC had wanted its media release to say that CommInsure agreed with ASIC’s concerns that it had engaged in misleading or deceptive advertising, Troup said.

But CommInsure gave alternative wording to remove any suggestion that it accepted the complaint, she said.

“As we acknowledged ASIC’s concerns, we didn’t entirely agree with them,” Troup told the inquiry.

“We were still defending our position ... but sitting here today ... I can see how ASIC’s concerns were legitimate,” she said.

CBA sold its life insurance unit to Hong Kong-based AIA Group for $3.1 billion last year, but the sale is still to be completed.