Advisers emerge with credit as life insurer sanctioned

The value of financial advisers in protecting their client’s interests has been emphasised by the Life Code Compliance Committee (LCCC) at the same time as it sanctioned an insurer.

The LCCC’s case summary made clear that financial advisers had played a critical role in protecting their clients’ interests and that even the sanctioned life insurer had sought to utilise advisers as a means of addressing the problem.

The LCCC acknowledged the role of financial advisers “in mitigating the level of consumer disadvantage that resulted from the breach”.

Indeed, it was the level of involvement by financial advisers persuaded the LCCC against not only sanctioning but naming the insurer.

According to the case summary, the life insurer sent a non-compliant letter to 170 customers who were declined cover suggesting that the insurer’s decision could not be reviewed.

The insurer self-reported its breach in November 2023 pointing to a template letter that did not include information about a customer’s right to provide additional information as well as their right to a review and complaint options.

“For our assessment of the breach, and as evidence that it had fixed the problem, the insurer provided copies of the template letter it had updated for the new Code that was introduced on 1 July 2023. This letter was reviewed and approved through the insurer’s established governance review process,” the LCCC case study said.

“We found that the letter also did not meet the standard required by the Code. The insurer told customers who were declined insurance cover that the decision could not be reviewed, and that “the assessment was final at this time”. While the rest of the letter implied that a review might be possible, we found that the insurer’s communication was ambiguous and contradictory and did not adhere to the Code standards of clarity, fairness and plain language.”

“The insurer has amended its template letters.

“To remedy the breach, the insurer initially proposed communicating with customers via their financial advisers, who were acting as the customers’ agents, an approach that did not involve the insurer directly writing to customers impacted by this breach.

“However, we considered this approach inadequate and directed the insurer to contact the impacted customers directly to inform them of their review rights. The insurer confirmed that it has now written directly to all impacted customers,” the LCCC said.

“The insurer told us that financial advisors would have been able to identify customers disadvantaged by this breach. While a financial advisor may have been able to play a role assisting customers, it does not replace the insurer’s obligation in the Code to provide customers with direct and clear information, written in plain language. Therefore, we found the insurer’s response to be inadequate.

“Our investigation into this matter confirmed that the insurer subsequently contacted all impacted customers and provided them with the information that they should have received at the time their insurance application was declined.”