A challenging year for life insurers and their customers highlights the importance of the Code
The Life Code Compliance Committee (the Committee) – the independent Committee which monitors and enforces industry compliance with the Life Insurance Code of Practice (the Code) – today released its 2019–20 Annual Industry Data and Compliance Report.
The Report aggregates data sourced directly from Code subscribers, together with outcomes from the Committee’s compliance monitoring work, to provide a snapshot of the life insurance industry and its compliance with the Code in what was a particularly challenging year.
Changes to consumer protection laws following the Financial Services Royal Commission, an increasing awareness by customers of their consumer rights, and the difficulties associated with business continuity during the COVID-19 pandemic have all played a part in the Report’s findings. These include:
- Covers in force fell by 20% in 2019–20 following the introduction of new laws to protect superannuation funds and control the sale of consumer credit insurance and funeral cover.
- Most claims decisions were made within the timeframes set out in the Code. Where Unexpected Circumstances delayed claims decisions, most subscribers were able to explain why.
- While overall complaint numbers were similar to the previous reporting period, complaints about claims rose 40%, with most of these relating to the time it took subscribers to assess customers’ claims.
- Breach events relating to claims, policy changes and cancellation rights impacted the most customers.
- Subscribers attributed 93% of all isolated breaches to people-related causes, despite saying they have competency frameworks in place to ensure staff comply with their Code obligations.
Commenting on the Report, Independent Committee Chair Anne Brown said:
“We acknowledge the operating challenges faced by Code subscribers during the reporting period, particularly the COVID-19 impacts during the last quarter, but we remind subscribers that the obligations built into the Code are especially important during difficult times. The Code guides subscribers’ decision-making towards outcomes that are fair, respectful, transparent and timely for all customers but particularly those who are vulnerable or may be experiencing financial hardship. In this context, demonstrated compliance with the Code has never been more crucial.”
“The Committee was pleased to see subscribers apply far more rigour to the data collection and compliance reporting process than was the case last year. Better quality reporting has given us valuable insight into subscribers’ responses to some of the unique challenges faced by the industry over the last 12 months.”
“We are concerned to note, however, that some of the issues we flagged in last year’s Report – such as the high number of isolated breaches of the Code attributed to people-related causes – do not appear to have been addressed by all subscribers.”
“The Committee knows that some subscribers have worked hard to improve their Code competency frameworks, including their training, monitoring and breach correction processes. However, we also know that other subscribers need to improve in this area. We therefore urge all subscribers to conduct an analysis of their training, monitoring and breach correction processes to look beyond who or what caused the breach to find out why the breach occurred.”
Compliance and Operations Manager
Code Compliance and Monitoring