Insurers have moved to defend the use of private investigators, saying they are necessary for the detection of fraud and they have tightened the industry code to prevent the misuse of surveillance.
In round six of the Hayne royal commission, Japanese-owned insurer TAL was forced to explain the invasive tactics used by its private investigator that involved following TAL's claimant to the swimming pool and observing detailed moments of physical affection with her partner.
TAL said in its submission published on Wednesday that it acknowledged the level of surveillance used in the case study was excessive, very personal and highly intrusive.
However, it defended its position, saying its approach to investigation was accepted industry-wide at the time and oversight of the use of surveillance has improved significantly with the introduction of the industry code.
Suncorp was also exposed for spying on one of 10 claimants before clamping down on the practice. It acknowledged there were cases when its private investigators drove erratically to follow the policyholder and accepted a surveillance engagement despite personally knowing the policyholder.
Financial Services Council senior life insurance policy manager Nick Kirwan said life insurers are already moving on from the use of private investigators.
"They are using it as the last resort," he said.
He said the new industry code prompted insurers to think about other ways they can investigate claims, including by involving mental health professionals at the claims stage.
Under the Financial Services Council Life Insurance Code of Practice, which came info effect in June last year, there are strict guidelines around the use of private investigators.
Requests for surveillance must be approved by a senior claims manager and investigators should avoid filming people other than the claimant.
Investigators should also stop surveillance if it is negatively affecting customers' recovery.
Insurance fraud significant
Insurance Council of Australia also defended the use of surveillance among general insurers.
"General insurers occasionally use private investigators to confirm details of a claim or if elements of a claim are suspicious. Insurance fraud is estimated to cost the industry more than $2.2 billion a year, which significantly adds to the cost of premiums," ICA general manager communications and media relations Campbell Fuller said.
"Insurers have a duty to customers to investigate and where possible eliminate fraud from general insurance."
The new version of the General Insurance Code of Practice, to be launched early 2019, will build on the standards for general insurers' use of private investigators, Mr Fuller said.
In the 2018 final report into the review of the code, ICA said insurers should maintain an internal register of investigators' licences and stop surveillance if it is negatively affecting a pre-existing mental health condition.
Wayne Gladman, national secretary of the Australian Institute of Professional Investigators, said private investigators are generally licensed by state and territory authorities and they have an obligation to act within the boundaries of the law.
He said private investigators act independently to get to the truth within the confines of the law.
"We are not an advocate for any side, we are a gatherer of information," Mr Gladman said.
Source: Financial Review