CommInsure apology over breast cancer case

CommInsure has apologised for wrongly denying a breast cancer sufferer's insurance claim because she did not meet its outdated definition of radical breast surgery.

The Commonwealth Bank's insurance business eventually paid the woman $170,000 under her 20-year-old life insurance policy after the Financial Ombudsman Service found the claim should not have been denied.

Two doctors said in their view the woman had radical breast surgery, the banking royal commission heard on Thursday.

But CommInsure decided someone could only have radical breast surgery if the entire affected breast was removed and denied the claim in 2016.

The inquiry heard CommInsure was relying on a definition of cancer that was about 18 years old by that time.

It was also imposing limitations on that definition that were not expressed in any of its policy documents, which did not define "radical" surgery.

The woman's GP said 20 years earlier when the policy was taken out she would likely have had a mastectomy but the treatment under current practice involved breast-conserving surgery and radiotherapy.

CommInsure managing director Helen Troup apologised for the way the claim was handled.

"The process that she had to go through while dealing with her health issue didn't meet the standards that we expect," she said.

"I imagine it caused her additional stress and I apologise for that.

"Her claim should have been paid earlier and again I apologise for that."

CommInsure faced a scandal and investigation by the regulator in 2016 over its use of out-of-date medical definitions, including for heart attacks.

The Australian Securities and Investments Commission's view is that relying on outdated medical definitions is not a breach of the law, provided the definition is clearly disclosed to the insured person.

But royal commission barristers agree with ASIC that reliance on outdated definitions is clearly out of step with community expectations.

Senior counsel assisting the commission Rowena Orr QC said the issue was not unique to CommInsure.

She said information from 10 largest life insurers revealed a lack of procedures to ensure regular and formal reviews of medical definitions in life insurance policies.