FSC Defends Insurers’ Code Compliance

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The Financial Services Council has defended its life company members in responding to a report by the Life Code Compliance Committee, which is critical of insurers code compliance regimes.

A statement from FSC says the LCCC report Life CCC Claims and Complaints Handling-Obligations is the final outcome of a review relating to cases dating back to the early days of the Life Insurance Code of Practice, 30 June 2017.

It says these are these are old, resolved cases and notes the LCCC report is silent on the positive changes made by the life insurance sector.

In its report the LCCC states in the executive summary that: “Subscribers must take their code compliance far more seriously than they have to date.”

It continues: “Compliance monitoring must be prioritised, ongoing and systematic. It should not take a bulk referral of alleged code breaches, followed by a committee investigation, to prompt subscribers to assess the efficacy of their compliance frameworks and ensure they are keeping the promises that they have willingly made to their customers by adopting the code.”

…the allegations in the LCCC report relate only to the timing of decisions, not the outcome

But the FSC says it’s is important to note that the allegations in the LCCC report relate only to the timing of decisions, not the outcome of decisions. It says what the data shows is:

  • Most allegations (598) were regarding the timing of claims decisions
  • After investigating the 598 allegations, more than half were found not to be breaches, and almost one in eight (13 percent) of these allegations were “unfounded”.
  • The remaining allegations (103) were about the timing of complaint outcomes, of which two thirds were found not to be breaches, and over 7.5 percent were “unfounded”.

In its statement, the FSC  the LCCC report is “…also silent on the LCCC’s own findings from their latest compliance report, which shows in the year to 30 June 2018, life insurers assessed 131,271 claims. Of these, 89 percent of income related claims and 92 percent of non-income related claims were within the required code timeframes.

THE LCCC Report

In its executive summary the LCCC says its review looked at “…11 code subscribers’ compliance with sections 8.16, 8.17 and 9.10 of the Life Insurance Code of Practice…”.

(The Life Insurance Code of Practice shows the 8.16 section relates to IP while 8.17 relates to lump sum claims.)

The executive summary notes the review was initiated by the receipt of more than 700 alleged breaches of the code from a plaintiff law firm in February 2018″. (See: Legal Firm Alleges Insurers Breached Codes Multiple Times).

“The alleged breaches concern sections of the code which relate to the processing of claims and complaints (sections 8.16, 8.17 and 9.10).”

The committee notes it undertook a substantial number of individual investigations together with an assessment of each subscribers’ underlying processes and procedures. “In tandem with the review the committee has provided guidance to subscribers where gaps and inadequacies in subscribers’ process were identified, and has monitored implementation of agreed remediation measures.”

The report says that in all the review found that 315 out of the 701 alleged  breaches amounted to breaches of the code.

It considers that a robust process for enabling compliance with these sections includes an appropriate combination of:

  • Automatic reminders within claims handling systems to prompt claims assessors to notify customers of Unexpected Circumstances and send any follow-up letters
  • Template letters that include all the information contained in sections 8.16/8.17 of the code to advise customers of the application of Unexpected Circumstances to their claim
  • Staff training, Quality Assurance and review programmes
  • Monitoring/reporting functions (such as regular exception reporting or reviews) to accurately track claims assessors’ compliance with their code obligations.