April 6, 2018
Life insurers have breached their own code of practice more than 700 times in six months and should face harsher penalties under ASIC enforced codes for failing to do so, a large legal firm has claimed in its submission to the Banking Royal Commission.
In its submission, Maurice Blackburn Lawyers also named AIA, CommInsure and TAL as having the highest number of alleged breaches based on cases from its case load, since the FSC’s mandatory Life Insurance Code of Practice (LICP) began on 1 July 2017.
The legal firm claim the alleged breaches relate to life insurers making a decision on a claim within six months from lodgement and providing a response to a complaint within 45 days where a policy is not part of a superannuation fund.
The submission indicated that AIA was subject to 159 alleged claim breaches, followed by CommInsure with 75 alleged breaches and TAL with 64 alleged breaches.
“…from our firm alone we have reported over 700 breaches of this code…and we have outlined the insurers who are the main culprits…”
Maurice Blackburn Principal, Josh Mennen said the LICP was failing to protect consumers and should be examined by the Banking Royal Commission and life insurers were “…all talk when implementing their codes, but the reality is the codes don’t have teeth and are doing little to drive better standards”.
“The life insurance code of practice was only implemented on 1 July 2017, but already from our firm alone we have reported over 700 breaches of this code in that short period and we have outlined the insurers who are the main culprits for these breaches.” Mennen said.
“The industry set itself strict timelines with respect to processing claims and responding to complaints, but as our clients’ experiences show numerous insurers have completely ignored these timeframes despite being signed up to the code,” he added.
Mennen said the life insurance sector was should not be able to ignore non-compliance with the LICP by calling the claim assessment time limits ‘aspirational’ and “…it must be held to account to ensure sick and injured insurance claimants are getting fair and reasonable treatment”.
He said the voluntary insurance in superannuation code of practice would also fail consumers as it was unenforceable, had no independent administrator. and was an extension of the LICP and had ‘inherited’ all of its flaws.
“That’s why we have asked the Royal Commission to recommend that codes of practice be required to have ASIC approval and enforceability, with robust sanctions for failure to comply,” Mennen said.
“We have also asked the Royal Commission to give consideration to ensuring enforceable codes enshrine standard definitions, with clear timeframes for processing claims and setting out remedies and sanctions for code breaches,” he added.