The CRR Report and CommInsure breaches

Part 1

Part 2

Description of Comminsure practices and financial decisions

A collective Fairfax- Four Corners inquiry exposed several allegations of unethical and deceitful conduct in CommInsure, putting the reputation of the Commonwealth Bank over the scandal in its financial planning division. The joint inquiry established that CommInsure Insurance had been refuting heart attack claims by intentionally using an outdated description hidden in the policy.  For example, the insurance firm did not stop taking premiums from customers like James Kessel, the 46-year-old man, from Wee Waa, who lodged a claim immediately after experiencing a severe heart attack in September 2014 (Fogarty, 2016). His application was vetoed purely by this out-of-date description. The investigation also established that the way CommInsure used to approach mental health conditions and to assess prospective policyholders left a lot to be desired. Other findings included the refusal to compensate terminal illness, and total permanent disability (TPD) claims on the gamble that a dying individual facing organ failure can have their life saved by a transplant.  In the real sense, a person can only claim their life insurance if they are confirmed terminally ill by two doctors and considered likely to die within 12 months.

In one case a terminally ill patient who was on a transplant waiting list was originally rejected on the ground that his policy was through industry fund HESTA that had opened up a tender for a new life insurance provider. A senior claims manager recommended delaying the claim for the longest time possible so that it would be handled by the new insurer if CommInsure’s contract was not renewed.  What is possibly most striking about this scandal is the extent to which the involved doctors appeared to get caught up in the beneficial interests of the insurance firm, even to the point of compromising patient care. They seemed to have become entrenched in an insurance firm that was operating to serve its commercial interests, with no obligation to honoring its moral and civil duties to those who have procured insurance in good faith.  This type of corporate behavior can be termed as managerialism where managerial practices are applied to run private or public companies in line with a predefined leadership and governance structure. According to Yeates (2016), managerialism in healthcare sets the principle of the market above other values, for instance, solidarity care and trust.  The behavior of the doctors embroiled in this scandal also reveals the issue of conflicts of interest in medicine and health. For any health expert, the primary interest is always the wellbeing of a patient. A secondary benefit is whatever thing that impedes the commitment of a doctor to promoting the best interests of a patient, for instance, the aspiration to accomplish the wishes of an insurance firm that pays or employs the doctor to offer independent medical advice. All these sorts of allegations have particular provisions about how they should be dealt with by the CommInsure board, which is a separate entity from the Commonwealth Bank. 

The CBA Code of Conduct and CommInsure breaches

Discussion of the CBA’s CSR Report

Chan et al. (2014) define corporate social responsibilities (CSR) as a corporation’s resourcefulness to evaluate and take responsibility of the corporation’s effects on social and environmental well-being (Golob, and Bartlett, 2007). The Commonwealth Bank of Australia has many practices and policies which can are accessible on their online site and are put under three major categories, i.e., governance, social and climate, environmental. A few cases of these practices and policies include their stakeholder engagement, government commitments, and remuneration principles.  The primary strategic objective of the Commonwealth Bank of Australia is to excel at safeguarding and to enhance the critical evaluation of the bank’s practices and financial decisions earlier explained against CSR principles. This is predominant in the Corporate Responsibility Report (CRR) of the Commonwealth Bank of Australia. Three basic principles which constitute CSR principles of CBA include sustainability, accountability, and transparency.

Evaluation of Comminsure’s Policies and Practices Relative to the CSR Report of CBA

The three corporate social responsibilities principles stated above can be related with the copious policies and practices abided by the Commonwealth Bank of Australia. An in-depth analysis of the Comminsure’s financial planning analysis reveals that of the insurance firm’s CSR practices connection with CBA’s policies and practices have been broken. First, the fundamental principle of accountability has been breached by Comminsure as the insurance firm did not take any charge for these actions. According to Abraham et al. (2008), the accountability principle infers that it is essential for an organization to be reporting the concluded activities to all the affected parties. This would be interpreted to mean that the bank is a part of an extensive societal network instead of mere employees focused institutions. Second, the violation of the transparency clause is obvious in the actions of CBA. According to Van et al. (2005), it is unethical for any organization to manipulate facts and figures to misinform her stakeholders. The breach of transparency by Comminsure or CBA by extension in this context was by using outdated medical descriptions captured under the life insurance policies to defraud policyholders. Concerning James Kessel’s claim against CBA, legal insurance representative James Berrill explains, “In James Kessel’s case, he was not advised and did not comprehend that he would not be compensated any heart attack benefits unless he met the specific definition” (Fogarty, 2016). This scenario is one of the examples where the CBA’s principle of transparency was broken. 

Description of Comminsure practices and financial decisions

Besides, the Life Insurance Code of Practice of the Commonwealth Bank of Australia was violated, as the first code pledge is to be truthful, respectful, fair, timely, and to practice open communication strategy. In regards to the activities performed by CBA, the Life Insurance Code of Practice is the most pertinent but which was violated which is directly connected to the third CSR principle of transparency. With close reference to CBA’s financial planning decisions, financial management plays a critical role in the day-to-day operations of the company. According to CBA CSR Report (2017), the principle of transparency allows the Commonwealth Bank of Australia to sufficiently plan and collect data for viable investment decisions. The problem that emanates is that the staff of Comminsure Insurance was erasing medical reports to give them a ground of falsifying and rejected the filed claims (Ryan, 2017). When unethical dealings are taken forth especially in financial data, it renders financial statements less useful. According to Cull and Melville (2018), these reports should remain accurate and honest to all stakeholders to make accurate financial decisions as tainted financial reports deter the process of decision-making.

Do sustainability and socially responsible outcomes really matter for CBA?

The concept of sustainability is explained by Golob and Bartlett (2007) as concentrating on meeting the wants of the present without compromising the capability of future generations to satisfy their desires. On the other side, social responsibility entails generating profit-making while at the same time undertaking activities that benefit society (Reinig and Tilt, 2008). From the two definitions, it is obvious that there is a direct correction of the two parameters. In the context of the Commonwealth Bank of Australia, its entire 2017 CSR report of 2017 pay a great emphasis on the current concerns while incorporating own corporate responsibility plan. The plan that CBA has adopted is categories into three that are evident in its 2017 CSR Report:

1. Education: – Through the education, digital and financial literacy programs, and the bank helps people obtain the skills and knowledge to improve the society’s needs and the country’s economy as a whole (CBA. 2017).
2. Innovation: – The Commonwealth Bank of Australia uses innovation to improve social results and financial wellbeing of the society through their programs, goods, and services.
3. Good business practice: – By concentrating on good business practices, CBA endeavors to support positive social, economic and environmental.

A comprehensive review of the above three categories contained in the 2017 CBA’s CSR report, i.e., innovation, education, and sound business practices can be interpreted to relate to the aforementioned the descriptions of corporate social responsibility and organizations’ sustainability. Also, in the metric productivity statistics of the CBA’s 2017 CSR report, it continues to portray the social, customer consummation and environmental metrics of the firm. Some statistics that capture this, for instance, include support of the local community, provision of financial literacy programs for schools and participation of employees in environmental conservation practices. These facts and statistics have increasingly continued to increase from 2013, an implication that that sustainability and corporate social responsibility are fundamental parts of the Commonwealth Bank of Australia. 

Discussion of the CBA’s CSR Report

Ethical violations compared to the CBA Code of Ethics.

Ethical principles on the word of Chan et al. (2014), offers a generalized framework within which some ethical issues may be analyzed. In regards to the actions of Commissure Insurance Firm, the moral principles that have been breached are beneficence, fidelity, and justice. Starting with beneficence, Reinig and Tilt (2008) describe beneficence as decision making based on what is correct and moral. An analysis of the actions of CBA’s indicates that the beneficence ethical principle was not upheld. With the efforts of deleting files under claimants is unethical and does not portray righteousness, it can be found to breach the principle of beneficence.

The fidelity has also been violated. According to Golob and Bartlett (2007), fidelity is entailed by remaining faithful to others regarding exercising honesty, keeping promises and respecting others. In case of failure to stay truthful in a business setting, stakeholders end up being denied the rights to exercise free choice. Concerning CBA’s actions, the staff of Commissure was bullying and compelling doctors not to give independent results or erase their medical views for different claims of patients (CBA Media Team, 2017).  For instance, it was revealed by Dr. Koh that “Commissure staff would approach the doctor that gave the opinions and compel them to change or delete the claims strategy to reflect what they wanted” (Matthews, 2016). This statement in conjunction with the actions subsequent actions do not conform to the requirement of the principle of fidelity.

Lastly, justice is the third principle that has been violated by CBA’s actions. The justice principle states that decision-makers should focus on measures that are fair to those involved. The employees and managers of CBA made decisions that did not follow the outline of justice as many individuals have suffered from these unethical rejected claims, only to save money for themselves rather than the greater good (Matthews, 2016). 

Conclusion

The expose of the CBA’s financial planning scandal by Fairfax- Four Corners is resonant of the early days of what turns out to be recognized as the Payment Protection Insurance (PPI) scandal in the United Kingdom. The dealings of CommInsure Insurance Firm puts the limelight on the flaws in the sector; a very significant industry that requires to be reformed fast. Regrettably, the industry has been for the most prolonged period left to reorganize itself, including creating a voluntary code of practice after the Australian Securities and Investments Commission (ASIC) established found that over 37 percent of intelligence on life insurance claims was on breach of the law. The cruel reality is these code requirements to be compulsory. Different life asset insurers should not be permitted to use different descriptions for medical conditions, for example, a stroke or severe heart attack and a limit should exist on how long it should take any particular insurer to process a claim. That is for starters. CommInsure Insurance was caught red-handed not performing in utmost good faith on specific policy descriptions and the manner some of its policyholders were treated.  From the analysis of the Commnsure’s financial planning scandal, the current and biggest dilemma for the Commonwealth Bank of Australia (CBA is her incapability to sustain trust with stakeholders. If the company followed CBA’s set of CSR and ethical principles, the majority of dilemmas deliberated above would be fixed quickly, reducing the latent of harm to future policyholders and the rise more ethical violations. As for the Commonwealth Bank of Australia, it should endeavor to address the raised concerns by first reconsidering and settling the previously rejected claims of James Kessel among others. 

Reference Lists

ABC TV. 2016. Money For Nothing – Four Corners [Video file]. Retrieved from https://www.youtube.com/watch?v=MjtLq73aVzU

Abraham, A., Deo, H. and Irvine, H., 2008. What lies beneath? Financial reporting and corporate governance in Australian banks. Asian Review of Accounting, 16(1), pp.4-20.

CBA Media Team. 2017. CBA 2017 Corporate Responsibility Report. Retrieved from https://www.commbank.com.au/guidance/newsroom/2017-Corporate-Responsibility-Report-201708.html

CBA. 2017. Corporate Responsibility Report 2017 (3). Retrieved from CBA website: https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/corporate-responsibility/2017/2017-corporate-responsibility-report.pdf

Chan, M.C., Watson, J. and Woodliff, D., 2014. Corporate governance quality and CSR disclosures. Journal of Business Ethics, 125(1), pp.59-73.

Cull, M. and Melville, B., 2018. A Review of Ethics Education in Financial Planning Courses in Australia.

Fogarty R. 2016. Who’s who in the Commonwealth Bank’s life insurance scandal? Retrieved from https://www.abc.net.au/news/2016-03-07/commInsure-scandal-whos-who-four-corners/7226576

Golob, U. and Bartlett, J.L., 2007. Communicating about corporate social responsibility: A comparative study of CSR reporting in Australia and Slovenia. Public relations review, 33(1), pp.1-9.

Matthews, A., 2016. The financial services industry: Whistleblowing and calls for a royal commission. Precedent (Sydney, NSW), (136), p.35.

Reinig, C.J. and Tilt, C.A., 2008. Corporate social responsibility issues in media releases: a stakeholder analysis of Australian banks. Issues in Social and Environmental Accounting, 2(2), pp.176-197.

Ryan P. 2017. ASIC to investigate CBA over money-laundering scandal. Retrieved from https://www.abc.net.au/news/2017-08-11/asic-to-investigate-cba/8796542

Van de Velde, E., Vermeir, W. and Corten, F., 2005. Corporate social responsibility and financial performance. Corporate Governance: The international journal of business in society, 5(3), pp.129-138.

Yeates, C.2016. CommInsure: Scandal to hit CBA brand, again. Retrieved from https://www.smh.com.au/business/banking-and-finance/comminsure-scandal-to-hit-cba-brand-again-20160308-gndj4y.html