The FAAA has called for changes to the Life Insurance Code of Practice, stating that mental health exclusions and higher premiums are eroding consumer trust and policy sustainability.
Phil Anderson, the FAAA’s GM of Policy, Advocacy and Standards, states that underwriting practices are falling short of community expectations and claims it places advisers and clients in increasingly difficult positions.
A key concern, says Anderson, is the application of mental health exclusions triggered by limited or irrelevant history such as short-term stress or counselling. He says these exclusions frequently group together unrelated conditions, including psychiatric disorders, trauma-related conditions and neurological diseases.
Anderson says exclusions should be condition-specific and based on actual history, rather than broad risk assumptions. He also notes concern that counselling of any kind, including mandatory or preventative counselling, is being used as grounds for exclusion.
Large pricing increases can have a substantial impact on the budgets of Australians…
The FAAA’s submission also challenges the treatment of Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS), which Anderson says is often excluded under mental health provisions despite research that he says “…demonstrates that ME/CFS is a biological illness”.
Premium sustainability
Premium sustainability is the other major pressure point highlighted by Anderson. The FAAA states advisers are seeing clients faced with repeated double-digit premium increases, on top of age-based rises, “…which in many cases will mean that they are paying nearly double what they were paying just a few years ago”.
“Large pricing increases can have a substantial impact on the budgets of Australians,” says Anderson. “Such large premium increases can put pressure on clients, particularly if they have other financial challenges at that time.”
The FAAA’s submission calls for clearer explanations of premium changes, better disclosure of cumulative impacts, and more realistic forward projections.
The FAAA is also critical of upfront premium discounting, which Anderson says encourages policy churn, disadvantages long-term policyholders, and contributes to instability in the market.
While the organisation supports the Life Insurance Code of Practice being reviewed every five years, it believes that CALI and the life insurance industry should be able to make “essential changes in between major reviews”.
