Australia: Multiple breaches found of Life Insurance Code of Practice

| 16 Mar 2020

An investigation by the administrator of the Life Insurance Code of Practice has found many insurers breached their commitment to process insurance claims and requests for reviews within certain timeframes.

The investigation by the Life Code Compliance Committee (LCCC) was sparked by a bulk complaint lodged by insurance law firm Maurice Blackburn in early 2018 which alleged more than 700 instances of breaches of the insurers’ industry code within a six-month period in 2017.

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Maurice Blackburn principal, Josh Mennen, said the findings by the LCCC lend weight to the view that many insurers failed to sign up to the Code of Practice in good faith and with due preparations, according to a report on the Financial Standard website.

Maurice Blackburn called out the life insurance industry’s failure to meaningfully reform its claims assessment culture and processes in the wake of the highly critical independent report showing widespread non-compliance with its Code of Practice.

Mr Mennen said that the LCCC report suggests that “despite all the rhetoric and promises to do better before and after the Hayne Royal Commission, many insurers have treated their own code as a paper tiger and this casts doubt on the industry’s ability to rebuild public trust.”

Mr Mennen added, “These hundreds of confirmed breaches are merely the tip of the iceberg because no doubt many more have gone undiscovered since I lodged this complaint with the LCCC two years ago.

“Given all these breaches of the Code relate to delays in the processing of consumers’ claims, the insurers should take immediate action to pay compensation, including penalty interest.”

In investigating the bulk complaint, the LCCC sampled a small number of alleged breaches and identified the systemic issues which caused the unreasonable delays and then tasked the insurers to apply those gaps and inadequacies across the affected consumers’ cases.

Lack of teeth

Maurice Blackburn says that the insurers' attitude is unlikely to change until the Code of Practice is given teeth through regulatory oversight by ASIC and meaningful sanctions for any breaches. It also lamented that the LCCC lacks the power to identify the worst offending insurers because this hasn’t been built into its charter.

The Life Insurance Code of Practice was introduced on 1 July 2017 to improve service standards across the life insurance industry.

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