The independent review of the Life Insurance Code of Practice has recommended 85 changes to strengthen consumer protections.
Prepared by independent reviewer Peter Kell, he says the majority of the recommendations require changes to the Code, while others recommend actions by insurers, CALI, and the Life CCC to support the operation of the Code and improve consumer outcomes.
It says the Code should contain standards that ensure consumers experiencing mental health conditions are treated fairly and transparently while enabling insurers to respond to well established sustainability challenges.
Other recommendations are that the Code prohibit insurance policies that automatically exclude cover for all mental health conditions, including policies that allow customers to opt out of mental health cover entirely.
Clause 2.1(b) of the Code currently states that insurers, when designing new products, will not incorporate a blanket exclusion specific to mental health in the general terms and conditions of the standard form contract. However, this does not apply to group policies or products designed to cover specific conditions such as trauma and critical illness policies.
It also recommends insurers review any standard form limitations on mental health cover at least every three years and that CALI establish a process with stakeholders to develop principles and guidance relating to mental health cover and product design.
Underwriting
The review also recommends changes to underwriting where insurers decline cover or offer cover on non-standard terms.
It says insurers should provide those decisions in writing, explain the reasons for the decision based on what the applicant disclosed, provide applicants with an opportunity to correct information, and align the information provided when alternative terms are offered.
It also recommends insurers provide, on request, a plain English summary of the actuarial, statistical, or other relevant data relied upon in making the underwriting decision.
The report also recommends:
- Changes to claims handling, including requiring insurers to provide a primary contact for every claim
- Specify minimum information in regular claims updates
- Complete reassessments of reopened claims within one month for income-related claims and three months for lump sum claims, and
- Publish data through the LCCC on insurers’ use of the “circumstances beyond our control” provisions
Other recommendations cover customers experiencing vulnerability, family and domestic violence, financial hardship, and First Nations customers.
Premiums
The report also recommends insurers communicate key information about premiums early in the sales process, including the difference between variable and variable age stepped premiums, that premiums are likely to increase over time, the effect of temporary discounts ending, and an example of how premiums may change over the life of a policy.
…there are clear expectations that the Code should continue to improve…
The review also recommends strengthening the powers of the LCCC, requiring insurers to maintain internal dispute resolution processes that comply with ASIC Regulatory Guide 271, reviewing the Code every five years, and developing the Code so it can become contractually enforceable in new customer contracts.
Kell said: “The extent of interest and detailed input into the review from a wide range of stakeholders indicates the significance that stakeholders place on the Life Code.
“It is seen as a key initiative from the life insurance industry to build trust and confidence, but there are clear expectations that the Code should continue to improve to meet evolving customer and community standards.”
Following publication of the final report, CALI CEO Christine Cupitt said: “Many people and organisations have contributed their time, insights, and expertise to the review.
“We will continue to engage with them as the industry now carefully considers the final report and its 85 recommendations.
“Our focus will be to ensure any changes to the Life Code strengthen customer protections, and are designed and implemented in a way that supports the long-term affordability and accessibility of life insurance for Australians.”
Now that is an interesting comment.
Last week the LCCC, acting under the current code, then blasted an insurer for claims delays. BUT DID NOT NAME THE GUILTY INSURER. Apparently there is no requirement to do so under the existing code and apparently under the amended code
That really is the joke. I see no mention in this article from Mr Kell that it is now the intention to name guilty insurers.
Advisers are not able to find out either. That ASIC requires Personal advice advisers, when recommending from three product alternatives, to make "additional reasonable inquiries" about all aspects of their recommendations.
How can advisers meet this onerous requirement withhout knowing that a particular insurer, which may have the most attractive premiums, has been found to be very lax in the payment of claims. That's just a nonsense
The other thing that sees be welcome but I'd like to read the fine print is that insurers are supposedly now going to fully explain duration based pricing. I'll believe that one when I see it
For their own sake, let's hope CALI don't implement the 83 recommendations – that would flush the industry further down the drain than it already is. The recommendations are a recipe for larger premium increases as industry loses more and more control of how it operates.
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