Grilling by Hayne Royal commission: Suncorp Group Ltd.’s (ASX: SUN) stock fell 0.38% on September 20, 2018 (3:26 PM AEST) with the company expected to be grilled regarding its policy terms, advertising and claims handling in its general insurance division, particularly related to the natural disasters at the Hayne royal commission scheduled for this week.
The key issues that have been highlighted so far in the general insurance sector have been the policies with terms that are unfair with exclusions and limits on liabilities; or are related to have unreasonable claims with insurance affordability issues. The added problem was pertaining to risk areas when it comes to cyclone zones or flood prone areas. Then underinsurance was another challenge wherein policyholders claimed to be insured for full replacement but were not actually receiving the entire amount.
Coming to Suncorp, the market is anticipating that Suncorp may be asked upon decision to offload its life insurance business to TAL, and this is under a deal where the company agrees to distribute Suncorp branded life products underwritten by TAL. As per the senior counsel of the Royal Commission, TAL tries to find reasons in order to not to pay claims and had serious systemic conflicts in its claims handling. Therefore, the regulators, SUN and their shareholders have to sit regarding TAL deal. On examining the group’s retail super fund operation, Royal commission stated that the company’s trustee seems to have gone against the Superannuation Industry Supervision (SIS) Act.
However, SUN has rejected all six open findings put across by Royal Commission. The group defends by saying that there is insufficiency in terms of evidence and there are direct contradictions by other evidences made before the commission. Furthermore, Royal Commission also asked SUN regarding the Suncorp Life that have the highest rate of rejected claims for total life insurance claims, and more than 4 per cent of all claimants denied. There was surveillance across physical and mental health claims of key insurers while between 2014 and 2016, the company snooped on 17.2% of policyholders noted to have submitted mental health claims. Suncorp’s AAMI division was also fined ($43,200) by Australian Securities and Investments Commission, ASIC for false and misleading advertising in relation to home insurance. Further, ASIC raised issue regarding the Wye River bushfires in 2015, where more than 100 properties were lost in the Christmas Day bushfire. AAMI was also suspected of inappropriately quoting cost of rebuilding homes. Meanwhile, SUN stock has risen 1.01% in three months as on September 19, 2018 and is trading at a P/E of 17.61x.
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