You may have heard rumblings recently about broad-scale reforms to Australia’s life insurance industry following ASIC’s 2015 review of retail life insurance advice. The review identified a need to build broader consumer trust in the sector and recommended – among other things – the implementation of an industry-regulated code of practice. After a lengthy consultation and design process by the Financial Services Council (FSC), the new Life Insurance Industry Code of Practice (or ‘Life Code’) officially comes into effect this month, with a transition period extending until July 2017.
The primary goal of the new code is to apply a set of industry-wide standards and benchmarks for how life insurance companies deliver underwriting and claims services, as well as addressing complaints processes and procedures. The code mimics similar codes of practice already established within the general insurance and banking sectors, and is designed to ensure life insurance providers are operating in a manner deemed ethical and fair to consumers.
Like most official documents the full Code of Practice makes for a long and boring read, so we’ve pulled out a few key points that are relevant to consumers.
The new Life Code:
- Is binding to all life insurer members of the FSC (non-members may adhere voluntarily) and applies to all products regulated under the Life Insurance Act 1995, including term life insurance, trauma and disability cover, income protection and funeral insurance.
- Demands minimum standards of conduct that will require life insures to review all aspects of their operations from product development, distribution and underwriting through to claims and complaint management.
- Specifies a limit of 45 days in which a provider must process complaints and give the customer a final decision for retail policies (and 90 days for complaints relating to insurance owned by a superannuation trustee.)
- Does not limit the consumer’s rights to pursue claims through external dispute resolution and the courts.
Compliance with the code will be monitored and enforced by the Life Code Compliance Committee, although anyone can report a suspected breech of practice and insurers are required to self-report any significant breech.
Although many believe that the new code represents just a fraction of the reforms needed to restore the integrity of the insurance sector, it’s still a win for consumers and a firm step in the right direction for an industry often characterised by shady operators, questionable ethics and evasive tactics.