The Life Insurance Code Compliance Committee (Life CCC) has sanctioned an un-named life insurer for failing to clearly inform customers of their right to have a declined insurance decision reviewed.
The failure, a breach of the Life Insurance Code of Practice, affected 170 customers who received letters stating the insurer’s decision to decline coverage was final and could not be reviewed.
The Life CCC found the letters to be ambiguous and contradictory, and determined they did not meet the Code’s standards for clarity, fairness, or plain language.
When someone is told they can’t get insurance, they need to know what their options are…
Chair of the Life CCC, Jan McClelland said: “The right to ask for a review is fundamental. When someone is told they can’t get insurance, they need to know what their options are – clearly and without confusion.
“This insurer’s letter told people the original decision could not be reviewed unless the customer provided new information when it wasn’t true. That goes against the expectations in the Code and is simply not good enough.”
The committee also found the insurer’s internal processes failed to detect or correct the issue.
The flawed letter had been reviewed and cleared by the insurer’s established governance review process. Updated versions intended to fix the problem still did not meet the Code’s requirements.
The Life CCC was also concerned by the insurer’s initial response, which indicated a reliance on financial advisers to contact affected customers, rather than the insurer communicating with them directly.
“Insurers have an obligation to inform their customers,” McClelland said.
As part of the sanction, the Life CCC will require the insurer to undertake an audit of all its relevant decision letters and operator scripts to ensure they comply with the Code. The insurer must also share the audit’s terms of reference and relevant findings with the Life CCC.
The insurer was not named in this sanction in recognition of the role of the advisers in the original applications, as well as the insurers subsequent efforts to contact all affected customers and rectify the failures.
