Report shows that more than 400,000 life insurance customers were impacted by breaches in 2020–21
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 2020–21 Annual Industry Data and Compliance Report.
The Report aggregates data sourced directly from Code subscribers, together with the Committee’s compliance monitoring work, to provide a snapshot of the life insurance industry and its compliance with the Code for 2020–21.
One of the Report’s key findings was the high number of life insurance customers who were impacted (or potentially impacted) by breaches of the Code. According to Code subscribers’ self-reported breach data, 429,347 customers were impacted during the year, mostly by breaches relating to policy changes and cancellation rights that were caused by inadequate processes and systems.
The Report’s other key findings include:
● Of all the claims decisions that were reviewed following a customer complaint, 45% of the claims decisions were reversed in the customer’s favour.
● Breaches of section 6.3 of the Code, which relates to the provision of annual policy notices to customers, had the highest customer impact, affecting 87% of all customers impacted by a Code breach in 2020–21.
● While many subscribers have endeavoured to improve their Code compliance capabilities over the last four years, others need to do more to improve their breach identification and reporting.
● Despite having substantially fewer claims to assess than last year, subscribers were unable to improve the proportion of claims determined within the Code’s timeframes. One-fifth of all decisions for income-related claims were made outside the required timeframe.
● Subscribers improved their categorisation of complaints this year, providing a specific cause for 96% of all complaints compared to 92% in 2019–20.
● More subscribers were able to say why they applied Unexpected Circumstances to claims than the previous year.
Commenting on the Report, Independent Committee Chair Jan McClelland AM said:
“The Committee was pleased to note an improvement in the quality of the data submitted by subscribers compared to previous years. Subscribers’ willingness to engage throughout the data submission process resulted in a more accurate dataset that has enabled us to provide a valuable overview of what the industry is doing well and where it needs to improve.”
Ms McClelland noted that “highlighting the need for subscribers to focus on improving their processes and controls, the Report’s findings underline the negative impact that process failures can have on customers, both financially and emotionally”.
“For subscribers to reverse almost half of all claims decisions following a customer complaint not only suggests that their claims assessment processes may be inadequate; it also demonstrates poor customer service. Having a claim incorrectly declined, then being exposed to a potentially lengthy dispute resolution process, can cause severe detriment to a customer at a time when they are already vulnerable.”
“Similarly, the Committee was concerned to note that breaches in relation to annual notices – which were largely caused by issues with systems and processes – impacted more than 373,000 customers. The potential for some customers to be adversely impacted by not receiving their annual notice is high and could, at worst, result in the customer’s policy lapsing without their knowledge.”
Commenting on what subscribers can do to improve their processes and their overall Code compliance, Ms McClelland said:
“The Committee strongly encourages all subscribers to review the guidance and recommendations we have included in the Report. Better Code compliance will result in better outcomes, both for life insurers and their customers.”
Compliance and Operations Manager
Code Compliance and Monitoring