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Income Protection Insurance Australia
Income Protection Insurance Australia :: News
Insurer's Overcharge: A Case for Rigorous Internal Audits
Insurer's Overcharge: A Case for Rigorous Internal Audits
An overlooked discrepancy by a life insurance company led to thousands of policyholders not receiving promised discounts, having continued unchecked for over a year.
This issue was unearthed following an unexpected internal audit, demonstrating the company's need for better oversight and auditing practices.
The lapse came to light when a random review uncovered that the obligations under the industry's code of conduct had been violated. The industry imposes strict guidelines for clarity in advertising and aligning quoted prices with what policyholders ultimately incur.
As outlined by a Life Code Compliance Committee report, "This case highlights the critical need for insurers to test and review the implementation of new pricing features to ensure they apply advertised benefits correctly."
Commenting further, the committee noted, "Failing to do so can result in financial detriment to customers and damage the trust between insurers and their customers, particularly when errors remain undetected for extended periods.”
This particular incident resulted in annual premiums being inaccurately charged to more than 4,000 customers, with an average overcharge of $8 each. The promised discount was supposed to be 2.5%, but customers only received a 2% reduction.
The insurer has outlined plans to rectify the situation by refunding the policyholders. Customers will be reimbursed the 0.5% difference, accompanied by an apology letter that clearly explains the oversight. Moreover, the company insists it has now corrected its systems to ensure that discounts are applied accurately in future policies.
Such cases shed light on an urgent necessity in the financial services industry for regular and thorough checks of internal procedures to upkeep transparency and customer trust. Providing leniencies on industry standards, as was the scenario here from the original report by The Source, results not only in monetary damage but also potential reputational risks for insurers.
The industry usually does not disclose names in its breach determinations, preserving confidentiality for those involved.
Published:Tuesday, 5th Nov 2024
Source: Paige Estritori
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Umbrella Policy:
An additional insurance policy that provides extra liability coverage beyond the limits of the insured's primary policies.
An additional insurance policy that provides extra liability coverage beyond the limits of the insured's primary policies.