Life insurers falling short on Income Protection claims-handling

Mike Taylor

Managing Editor and Publisher

12 May 2026

Months after some superannuation funds have been hit with penalties over undue delays to the handling of death benefit claims, the Life Code Compliance Committee (LCCC) has hit insurers for lagging on timely initial claims information and income protection delays.

The LCCC, established by the life insurance industry as an independent body to monitor compliance with the Life Insurance Code of Practice, has used its 2024-25 Industry Data and Compliance Report to point to both improvements and continued failings.

The report pointed to reductions in overall breaches but said that delays in income protection payments increased over the 12 month period, “highlighting ongoing challenges insurers have in meeting important commitments”.

Commenting on the report, LCCC chair, Jan McClelland said the reduction in customers affected by breaches was encouraging, but stained improvement depends on insurers addressing the causes of recurring issues.

“It is pleasing to see fewer customers affected by breaches this year, and we hope to see that improvement continue,” McClelland said.

“However, insurers must ensure their systems, controls and oversight are strong enough to prevent repeat issues and support reliable outcomes for customers.”

McClelland noted that breaches related to timely payment of income protection benefits rose significantly, with more customers experiencing delays in receiving payments intended to support them when they are unable to work.

She said timely payments are critical for customers navigating illness or injury.

“Income protection benefits are designed to provide financial stability at a time when customers may be at their most vulnerable,” Ms McClelland said.

“Delayed payments can place additional strain on people who are already dealing with significant personal and financial challenges.”

The report also found that communication processes remain an area requiring focused attention, particularly at the start of claims.

Breaches relating to providing timely initial claims information increased over the reporting period, indicating that some insurers are not consistently meeting expectations for early, clear communication with customers.

“When customers don’t receive timely and clear information at the start of a claim, it can create uncertainty at an already stressful time,” Ms McClelland said.

“Clear communication helps people understand what to expect and supports better outcomes throughout the claims process.”

The Life CCC also highlighted an increase in complaints about Total and Permanent Disability (TPD) claims.

While complaints overall decreased, complaints relating to TPD claims increased and have risen consistently over recent years, reflecting the complexity of these claims and the challenges customers can face when navigating them.

“These claims are often made in difficult and complex circumstances and customers need confidence that insurers’ processes will support timely, consistent and well communicated outcomes,” Ms McClelland said.

“Understanding the drivers of dissatisfaction is an important step in improving both processes and customer experience.”

The Life CCC said the report highlights areas where insurers are making progress, as well as opportunities to strengthen compliance and improve outcomes for customers.