Life insurers chastened on complaints handling

Mike Taylor

Managing Editor/Publisher, Financial Newswire

29 September 2022

Australia’s major life insurers have been chastised by the Life Code Compliance Committee (LCCC) for failing to improve their compliance monitoring, particularly around claims-handling.

The LCCC has pointed to the committee receiving increased levels of consumer complaints which are not being reflected in the level of breaches being reported by the life insurers.

The chair of the LCCC, Jan McClellan said the committee was seeing an increase in breaches reported by consumers and its own studies, yet continued to see some subscribers report low numbers of significant breaches.

“This is a trend that has persisted over the last three years and suggests that not all subscribers have adequate breach detection processes,” she said. “While some insurers are working very well with us and actively looking to enhance performance, others need to improve their monitoring and reporting processes and systems.”

“This will be particularly important as more than 50 changes to further protect customers are implemented when the new Life Insurance Code of Practice comes into effect in July 2023.”

McClelland said that in less than a year the industry would transition to a new Code – one that introduces more consumer protections and enables the Committee to determine significant breaches and sanction non-compliant subscribers.

The number of allegations of breaches received or identified by the Committee from consumers and other sources rose to 191 in 2021-22, up from 149 the previous year. For the fifth consecutive year, most of these concerned claims.

For alleged breaches of the Code’s complaints and disputes obligations, there was a noticeable improvement – down 58% from the previous year to be at the lowest since the Code was adopted in 2017.

Subscribers reported 22 significant breaches of the Code in 2021-22, down from 33 the previous year – most related to claims handling and policy changes and cancellation. Half of the 22 reported significant breaches were identified through the Committee’s ‘Own Motion Inquiries’.

Across the year, the Committee investigated 216 breach allegations and reviewed 37 significant breaches, many of which had remained open from previous years – bringing the Committee closer to its aim of being able to close all investigations no later than six months after receiving an allegation.