Australian life insurers should be able to offer consumers the choice to modify their cover for mental health conditions, including opting out of that cover for affordability reasons, according to the Council of Australian Life Insurers.
CALI emphasises that any such decision should be informed and voluntary and supported by appropriate safeguards, while standard-form disability insurance contracts should not automatically exclude cover for all mental health conditions.
This position forms part of CALI’s action plan released in response to the Life Code Independent Review Final Report delivered by former ASIC Deputy Chair, Peter Kell, published at the end of June (see: Independent Review Calls for 85 Life Code Reforms).
CALI’s industry response addresses all 85 recommendations made in Kell’s review and establishes four priority workstreams covering:
- Mental health
- Claims handling
- First Nations customers
- Funeral insurance
It says further work is expected to be completed during the first half of 2027.
Mental health was a major focus of the independent review, where CALI CEO, Christine Cupitt, states mental ill-health is one of the biggest social and productivity challenges facing Australians and their employers.
“Australia’s life insurers will always be there for people who have been deeply affected by mental ill-health. Our priority is to ensure life insurance remains accessible, affordable, and sustainable for all Australians,” she says.
Recommendation 4
A key point of difference relates to Recommendation 4, under which the independent reviewer recommended the Life Code prohibit total exclusions for mental health conditions in standard-form contracts, including where a customer elects to opt out of mental health cover entirely.
CALI has proposed what it terms an alternative industry response:
“When it comes to Recommendation 4, we agree that no individual insurer’s standard form contract should fully exclude cover for all mental health conditions,” says Cupitt.
However, Cupitt says CALI has a different perspective on whether consumers should retain the choice to remove mental health cover:
We should also give customers the choice as to whether they want to remove the mental health cover for affordability reasons
“We should also give customers the choice as to whether they want to remove the mental health cover for affordability reasons. We need to ensure that choice is informed and voluntary.”
Reflecting Cupitt’s comments, CALI’s action plan says customers should be able to choose to modify their cover for mental health conditions, provided that choice is informed, voluntary and supported by safeguards.
The action plan also says the prohibition on automatic blanket exclusions should not prevent insurers from applying benefit-design features to mental health cover as long as they are consistent with discrimination law. These include:
- Caps
- Eligibility criteria
- Waiting periods
- Maximum sum insured limits
CALI also proposes that insurers should continue to be able to offer alternative terms relating to mental health conditions following individual underwriting, consistent with anti-discrimination law. The action plan notes that any industry agreement remains subject to any regulatory approval which may be required.
Further mental health work
CALI has yet to settle its response to several other significant mental health recommendations.
Recommendations 5, 6, 7 and 9 will form part of its mental health priority workstream, including proposals requiring limitations on mental health cover to be supported by actuarial or statistical data and for product designs to be reviewed at least every three years.
Cupitt says relevant evidence can include:
- Population statistics from Australia and globally
- Insurers’ own claims experience
- Industry and reinsurer data
- Underwriting guidelines
- Published medical and epidemiological research
CALI has separately supported requiring insurers, on request, to provide applicants with a plain-English summary of the actuarial, statistical or other relevant data relied upon in an underwriting decision.
Broader Life Code changes
Beyond mental health, CALI has supported a substantial range of other changes proposed by the review.
Among those of particular relevance to advisers and their clients are stronger provisions for customers experiencing vulnerability and financial hardship. These include identifying potential signs of hardship earlier, tailoring assistance to individual circumstances and making information about available support easier to find.
CALI also supports customers having access to a real person who can assist them during a claim. A broader claims-handling workstream will consider recommendations dealing with claims timeframes, regular progress updates, delayed claims and information requested from claimants.
Other supported measures include stronger privacy and safety protections for people experiencing family and domestic violence; clearer access to support for First Nations customers; and establishing an expert panel and separate Medical Definitions Guide to regularly review industry-standard medical definitions.
The industry has also backed stronger independent oversight, including expanded Community Benefit Payment sanctions and greater transparency for Life Code Compliance Committee inquiries. It has supported considering contractual enforceability of the Life Code as part of the next Code review.
Advisers and other industry stakeholders can click here or on the image below to access CALI’s full response to the 85 recommendations contained in Peter Kell’s Life Code Independent Review Final Report.
