The Life Insurance Code Compliance Committee (LCCC) claims there are still some insurers that are not following the 2023 Life Insurance Code of Practice that relate to mental health. These, states the organisation, are relying on blanket mental health exclusions or rigid underwriting practices, despite industry obligations to assess applicants individually.
“Compliance with the code isn’t optional,” said LCCC chair Jan McClelland. “Insurers that still use blanket exclusions must improve to meet the code’s standards.”
Research undertaken by the LCCC found that most of the underwriting guidelines it reviewed relied solely on exclusions, rather than exploring alternative risk controls such as loadings, limits or caps. The committee said this practice restricts access to cover, risks reinforcing stigma, and could undermine public trust in life insurance.
Defaulting to exclusions means that customers are not being seen as individuals…
McClelland said these practices do not align with the spirit of the code, which requires fair, individualised assessment.
“Defaulting to exclusions means that customers are not being seen as individuals,” she said. “Insurers need to demonstrate that they are genuinely weighing up each applicant’s circumstances.”
The committee also highlighted a lack of reliable data on mental health disclosures and their outcomes, limiting insurers’ ability to identify systemic issues and improve practices.
“Better data is critical to gaining meaningful insights,” said McClelland.
The LCCC suggests insurers systematically collect and analyse data on how mental health disclosures are handled during underwriting. This includes:
- The number of applicants who disclose a mental health condition
- Underwriting outcomes (standard terms, alternative terms, and declines)
- Risk measures they apply (exclusions, caps, limits, higher premiums)
- Referrals for expert advice
- Complaints and whether decisions were reviewed or overturned
“We understand that not everyone who discloses a mental health condition, past or present, will be eligible for cover,” McClelland said.
“The increasing prevalence of mental health conditions only makes it more important for insurers to get underwriting right with an approach that considers individual circumstances properly.”
The LCCC will seek updates from insurers over the coming months on steps to improve training, strengthen underwriting processes and collect better data. Non-compliant insurers may face further action.
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