A young father who is terminally ill; a former employee with MS. Both were refused payouts by the insurance arm of the Commonwealth Bank. Our investigation has uncovered extraordinary evidence of CommInsure’s unethical treatment of customers, allegations backed up by its own former chief medical officer.

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van Pashalis had it all planned. He had booked flights for a holiday with his partner, Lynn, and baby girl, Chloe. When they got to Malaysia, he planned to propose to Lynn. But the trip never happened.

In the same week he paid for the airfares, the 37-year-old IT contractor was diagnosed with acute myeloid leukemia, a rare and aggressive cancer affecting the bone marrow.

Instead of organising his holiday, Pashalis was rushed into an emergency round of intense chemotherapy.

“The world was my oyster,” he says. “The next minute your heart’s ripped out, not knowing if you’re going to be around to hear your daughter say, ‘I love you’”.

Multiple rounds of chemotherapy, some radiation therapy and a stem-cell transplant have failed to halt the disease and Pashalis is still classified as terminally ill. In all likelihood, this young man will die within a year.

Under the life insurance policy sold to him through his industry fund, CareSuper, terminally ill people are entitled to a payout. For Pashalis, that would work out to $480,000, including super.

But his insurance through CareSuper is provided by the Commonwealth Bank’s life insurer, CommInsure.

Evan Pashalis “If it were to be my last weeks of my life, I’d rather spend it with my family enjoying us.”

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he life insurer has disputed the prognosis of three specialists. Pashalis has accused CommInsure of “tormenting” a dying man who wants the money to plan his daughter’s education and future. He has never met the CommInsure doctors who made this call.

“I was classified as terminal, still am. Yet they declined.”

His case - which CBA finally moved to settle with an offer to Pashalis on the eve of this investigation being published - is part of a pattern of unethical behaviour within CommInsure exposed in a joint investigation by Fairfax Media and Four Corners.

It is behaviour laid bare in explosive internal documents, in numerous case studies and in the powerful testimony of whistleblower Dr Benjamin Koh.

Koh is a highly credentialed physician and was CommInsure’s respected chief medical officer. Appointed with great fanfare in 2013, he departed in disgust just two years later.

Koh agreed to speak about CommInsure’s treatment of its customers’ claims after repeatedly and unsuccessfully trying to speak out as a whistleblower inside the company. “It goes to the fundamental core of ethics of me being a doctor, of me doing the right thing,” he says.

Benjamin Koh Whistleblower “Profit first, everything else is second.”

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n addition, Fairfax Media and Four Corners have obtained explosive internal documents, which were presented to and verified by Koh, suggesting the repeated use of delay tactics to avoid paying out claims and CommInsure using questionable and outdated medical definitions to deny customers their due.

There are allegations of claims managers cherry-picking doctors to get the prognoses they seek, and doctors being asked to change their opinions. In some cases, the files of claimants have gone missing.

It is systemic conduct that sick and suffering CommInsure customers say has added to their trauma; conduct that has broken trust with those the company is required to deal with in “utmost good faith”.

CommInsure has more than 4 million policyholders Australia-wide, and it collects $2.5 billion in premiums from them each year. In the past six months, it made a profit of $191 million for its parent company, the Commonwealth Bank, Australia’s biggest bank.

Every year, millions of Australians are funnelled into CommInsure life insurance policies through their industry super funds, as was the case with Pashalis, or through retail or corporate funds administered by Commonwealth-owned Colonial First State.

Others buy CommInsure life insurance, trauma insurance or income protection insurance through financial advisers, often through CBA’s army of financial planners.

It was Koh who, in mid-2014, audited the company’s trauma policy and found that it was using an outdated and discredited method for defining heart attacks. He warned it was an indefensible practice that potentially disadvantaged many customers and had the potential to tarnish the brand.

Ian Narev CEO of CBA “How

sorry I personally feel ...” Watch the full interview here >

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t was Koh who tried to elevate allegations that a payout was delayed because a customer’s policy was through an industry fund, HESTA, that was soon to tender for a new life insurance provider - meaning CommInsure could avoid paying the claim if it lost the tender.

And it was Koh who took concerns to senior management about the pressure he and his team were coming under to modify their medical opinions to allow the company to reject claims.

“They were quite blatant about it,” Koh told Fairfax Media and Four Corners.

“They would go up to the doctor that provided [the] opinion and say, ‘That this is not where the claims strategy wants to head and can you please change it or delete it.’”

In an increasingly common method of delaying claims to dying customers, CommInsure was denying payouts to customers hit by organ failure, arguing that their lives would be saved if they were lucky enough to receive an organ transplant.

It is a practice rife with ethical red flags. For those waiting for a transplant, there is no guarantee an organ will ever become available. Even if one does, the transplant operation may not be a success, or the body may reject the organ.

Koh’s concerns about this new policy were laid bare in a series of emails obtained by Fairfax Media and Four Corners.

In March 2014, in an email to a senior manager, Koh cautioned that the transplant policy was becoming a “recurrent issue”. He raised a series of ethical and legal problems with the practice and warned that it risked damaging the CommInsure brand.

“I’m not sure having the chance for a transplant would be considered reasonable grounds for declining TPD [total and permanent disability claim],” Koh writes. “If a client has an end-stage organ disease, I think that fact in itself is an indicator of TPD.”

From Dr Benjamin Koh “Every [medical officer] is all for seeking every possible legal and ethical means of thwarting the fraudulent claimant. We also understand the harsh realities of contractual terms. But neither apply here. You cannot fake an organ failure. ” Read full email here

In June 2014, things came to a head through a “media threat” issued by the lawyer of a customer ailing from bronchiolitis - who had been denied a terminal illness payout on the chance he may receive a lung transplant.

An email circulated discussing the best way to deal with the “threat”. In doing so, it laid out the extraordinary way the customer’s claim had been dealt with within the insurer.

The patient had completed his claim with the required two medical specialist reports confirming the likelihood of organ failure and death within 12 months. But CommInsure had denied the claim on the opinion of its own medical officer, who argued that one of the specialist doctors had not factored in the chance of the claimant receiving a transplant.

CommInsure played the numbers game. It went back to one of the original doctors, requesting he put a percentage on the chances of the patient surviving 12 months.

The response was that, without a transplant, the chance of survival for two years would be in the order of 50 per cent. This was enough to bolster CommInsure’s decision to reject the claim.

But, as the email showed, there were concerns within CommInsure that the claimant’s lawyer and the media may “raise the issue that our decision/rationale to decline the claim is flawed”.

The email’s author, who worked in the claims department, expressed concern that the public would side with the patient due to “the circumstances surrounding his medical condition and the fact that he won’t present well in front of the cameras”.

Concerned about perceptions – but not, it appears, the person involved – the author fretted about the position the media may take when “a 57 year old male nurse, who has held life insurance cover for 12 years, is diagnosed with a terminal condition and requires a lung transplant, is unable to access his insurance benefits”.

Suffering from

organ failure ...

and seeking your insurance? Not likely so long as you could possibly be saved by an organ transplant.

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oh had deep concerns with the handling of the case; he forwarded the email with his notes to a senior manager.

In the email, he said the medical team had been placed under “undue influence … to provide an opinion that they seek”.

The case, he said, had been dealt with “purely for financial and economic gains above all else”.

The person at the centre of the case is the same whose claim had, allegedly, already been delayed because his CommInsure policy had also been purchased through industry super fund HESTA, which had put its insurance out to tender.

The name of the person is Nicholas Bishop, a father of four.

Bishop was stunned when presented with the internal correspondence discussing his condition.

“You’re not seen as a person ever,” he says. “You’re just a financial liability in terms of the insurance company’s eyes.”

The threat of media exposure was too much and CommInsure decided to settle the claim. Bishop later received a transplant but there are no guarantees that his body won’t reject it. He remains very sick.

Nicholas Bishop “You’re not seen as a person.” SUPPLIED BY Four Corners​ & Klaus Toft

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ommonwealth chief executive Ian Narev was asked about Bishop’s case, and the email discussing his potential appearance in the media, in an interview last week.

“I’d love to give you a cast-iron guarantee that we don’t have individuals who may write emails or make decisions in a way which we don’t support,” he said.

“If we find that sort of behaviour, we have dealt with it swiftly and we will deal with it swiftly.”

He said he was said “saddened and disappointed” by the handling of the cases brought to light by Fairfax Media and Four Corners.

When asked about the allegations that doctors were leaned on to change or delete opinions, Narev said such claims “would be completely inconsistent with the culture that we are building at the Commonwealth Bank and inconsistent with the way that we run the bank”.

Koh was fighting the company on another front. He had discovered an explosive flaw within the company’s record-keeping systems that had left customer records wide open for manipulation. Other doctors had complained about it but it was the first time it had personally happened to him. It related to medical opinions.

It came to light as he was dealing with the case of James Kessel – the customer, from Wee Waa, who had suffered a severe heart attack in September 2014 but whose Comminsure trauma insurance claim was rejected on the basis of an outdated medical definition.

Koh was asked to review the Kessel case by one of the medical officers working under him. In the space of a day, part of the file went missing from the system.

Then he found more examples of missing files. The matter, as Koh saw it, needed investigating and fixing, urgently. Its potential implications were wide-reaching. He wrote to a senior manager in November 2014:

From Dr Benjamin Koh “If opinions are being deleted or disappears from the records after medical officer input, it throws into question the integrity of the system and our record of events/opinions?” Read full email

“This may have wider procedural fairness implications at litigation if it is happening to other records.”

In Koh’s mind, the problem had disturbing parallels with another recent scandal that had engulfed the bank – the revelations of misconduct within the bank’s financial planning arm.

Management elevated the matter to the company’s legal department. But, in March 2015, it decided not to take it any further, saying it was not a threat to the bank’s licences nor a breach that needed to be reported to regulators.

“In essence the internal governance team, together with the internal legal team came up with the finding that yes, medical records were missing,” Koh says.

“There’s nothing we can do about it, we’re not going to go there. We don’t have the resource to explore it. Let’s move on.”

By now, Koh had decided that the “unethical” practices at CommInsure were violating his medical ethics. He took his concerns to senior management then to the board of CommInsure.

Koh’s time at the bank was running out. In a practice that he says was permitted by his former manager, Koh had been forwarding work records to a personal email account to ensure they did not go missing.

This though was the stated key reason for his sacking in August last year, with the bank citing his “poor judgement”.

Koh is now preparing to sue the bank for unfair dismissal and his lawyer, Michael Bates, describes the bank’s reason for sacking him as “farcical”.

“He was asking hard questions. They didn’t want to deal with him. The easiest way to fix that problem was to remove it.”

Bates, a litigation lawyer with years of experience dealing with insurance matters, is also Pashalis’ lawyer and helped settle Bishop’s claim. He says the allegations exposed by Dr Koh are “extraordinary”.

“They are certainly the biggest thing I’ve heard as a litigation lawyer working in the insurance world,” he says.

“There are allegations simply of unethical behaviour, people within the organisation asking these doctors to delete their medical records, change their medical records, cherry-picking which doctor they go to to get a report, and if they’re not happy with that they will look outside and obtain a report from somewhere else.”

Michael Bates Lawyer “The conduct of this bank is anything but ethical.”

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arev said he could not comment on any allegations that may have been passed to the CommInsure board, including those about missing files. “The CommInsure board would not be expected to and indeed could not let me know of those findings, and I shouldn’t make enquiry as to those findings, the reason being that a life company must be set up with an independent board for the benefit of the members to make sure that the interests of the policy holders are paramount.”

The Commonwealth Bank is still reeling from the financial planning scandal that hit the bank in 2013, which brought to light revelations of forgery, fraud, missing files and a cover-up by management thanks to another whistleblower, Jeff Morris.

Thousands of customers were given inappropriate advice and lost their life savings. This time around, there is no doubt that the warnings about unethical behaviour went all the way to the top.

In a final attempt to spur action, Koh wrote to Narev two days after his sacking, on August 13, 2015.

From Dr Benjamin Koh To CBA CEO Ian Narev “I cannot help but feel that I have been victimised for raising whistleblower ethical concerns and that the ‘official’ reasons for my termination is but a convenient excuse.” Read full email here

The Australian Securities and Investments Commission wants much stronger corporate whistleblower protection laws in Australia. Chairman Greg Medcraft says how a company treats whistleblowers says a lot about its culture - and he believes something is amiss in the culture of the big banks in Australia.

“Sometimes it might be just a few apples... [but at] what point do you have so many bad apples that there’s a problem with the tree?”

Medcraft says ASIC will examine the CommInsure allegations.

Senator John Williams, an outspoken critic of Australia’s big banks, will examine the life insurance industry as part of the Scrutiny of Financial Advice inquiry underway before the Senate economics committee.

“I question how wide this problem is in the insurance industry,” he says.

A push to boost corporate whistleblower protections will come too late to help Koh.

Nor is he alone among former Commonwealth Bank employees left devastated by their treatment at the hands of CommInsure.

As Fairfax Media and Four Corners have revealed, an award-winning employee was “ill-health retired” from the bank on mental health grounds, with the bank agreeing he could never work again. But CommInsure initially refused to pay him a total and permanent disability claim.

Helen Polydoropoulos “I felt like I was being made a fool out of.”

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hat case is echoed by that of Helen Polydoropoulos, a former customer service rep at CommInsure, who was diagnosed with multiple sclerosis. MS affects the central nervous system. In Polydoropoulos’ case, she was struck with agonising burning sensations up and down her limbs.

Polydoropoulos was ill-health retired from the bank in November 2011. She was told by senior bank figures that the Commonwealth would look after her, and was advised to claim the total permanent disability payout provided for under her CommInsure life insurance policy.

After compiling extensive information from her doctors, Polydoropoulos filed her insurance claim. It was rejected, so she tried again – only to be knocked back again. She was refused three times.

Polydoropoulos had lodged legal proceedings in the NSW Supreme Court, with the bank signalling it would fight her claim.

But on Friday, Narev pledged the bank would “put right” its treatment of Polydoropoulos.

“I can’t imagine the stress that she’s under. I haven’t been in that stress... that is an unacceptable outcome for a customer and we’ll put it right.”

Likewise, Narev said he would personally apologise to Evan Pashalis. “So the first thing I will say to him is how sorry I personally feel,” he said. “I’m a father of a daughter who looks about the same age as the daughter he’s playing with, and he’s in [an] already distressing situation with his health. And the fact that anything that may have been done anywhere in the Commonwealth Bank, that not only didn’t help that situation but made that situation worse, is something that I feel very deeply.”

Narev said the status of the Commonwealth as the “ethical bank” remained. “We need to realise we’re going to mistakes, do our best to minimise them, but realise we will make them. And one test of how ethical we are is how we respond to those mistakes when we make them.”

However, he would not be drawn on the situation of Koh, or his allegations, citing legislation governing life insurance companies.

A response to Koh’s letter to Narev finally arrived - last week - seven months after he wrote it, and just days after Fairfax and Four Corners approached the bank for an interview. It was written by the group legal counsel and chief corporate spinner, David Cohen.

It said Koh’s concerns had been reviewed and an action plan put in place to make changes. It accused him of misleading conduct and repeated the allegation that the bank had sacked him because he had sent confidential work files to his personal email. It said his sacking had nothing to do with the concerns he had raised.

Koh maintains that his former boss had allowed him to forward the emails. He says the allegations about misleading conduct are “without basis”.

He stands by his final words in the letter to Narev: “I would welcome the day a Royal Commission exposes all this and for the public to make up their own mind.”