The life insurance industry’s new code of practice is a modest step but much more work is needed to deliver good consumer protection, say Financial Rights Legal Centre and Consumer Action Law Centre.
“The life industry is rightly under intense scrutiny, and an industry code of practice should deliver high standards when selling insurance and deciding people’s claims,” said Gerard Brody, Consumer Action Law Centre CEO. “This first code is an acceptable start, but there are significant gaps and more needs to be done.”
Katherine Lane, Financial Rights Legal Centre Acting Coordinator, said: “Most Australians have their life insurance through their super funds.* The code gives those people no guarantee that their insurance claims will be decided within a set time.”
“People don’t see the distinction—life insurance is life insurance. We urge the insurance and super industries to step up and make sure that people with their life insurance in super have appropriate protections when they make claims.”
Consumer groups’ verdict
- Investigations and surveillance: The code provides protections for people who are subjected to investigations and surveillance while their claims are being assessed.
- Claims timeframes: The code makes a significant step in promising that life insurance claims will be decided in a maximum of 12 months. However, these timeframes do not apply to people who have their life insurance in their superannuation—this is a glaring omission affecting many people who have life insurance.
- Medical definitions: The code promises three-yearly reviews by a ‘relevant’ medical specialist, who does not have to be independent of the insurers. It also guarantees updates to medical definitions but for ‘on sale’ policies only—this is likely to leave gaps for many people whose policies are no longer ‘on sale’.
- Legal status of the code: The code is not enforceable by courts or tribunals, or registered with ASIC—the industry must begin the registration process so that Australians can have confidence in the code.
Quotes attributable to Gerard Brody, Consumer Action Law Centre CEO:
“The code is also insufficient with respect to very problematic products and sales practices, for example, funeral insurance and ‘add-on’ sales practices. Australians expect insurance to be valuable, whereas too often these are about gouging the most vulnerable”.
“Life insurers have more to do to make improvements for people who are buying life insurance or making claims, but this is a modest first step.”
“The parliamentary inquiry into this industry that is now underway means they have to keep the momentum going.”
* Life insurance held in superannuation funds accounts for 67% of sums insured: Rice Warner, ‘Insurance Administration Expenses’, August 2014.