Productive and successful year for life insurance compliance body
The Life Code Compliance Committee (the Committee) – the independent Committee which monitors and enforces industry compliance with the customer service standards set out in the Life Insurance Code of Practice (the Code) – today released its Annual Report for 2020–21.
Despite the ongoing challenges and disruptions caused by the COVID-19 pandemic, 2020–21 was a productive and successful year for the Committee. By introducing a number of efficiencies to its compliance monitoring and breach investigation processes, the Committee was able to:
- Complete 294 assessments – a record number.
- Publish 68 Determinations 1 , one Guidance Note and one case study to help subscribers to the Code improve the quality and consistency of their compliance reporting.
- Publish its inaugural Own Motion Inquiry – an investigation into subscribers’ compliance with section 3.2 of the Code (the requirement to review the medical definitions of all on-sale policies at least every three years).
- Commence a second Own Motion Inquiry – an investigation into subscribers’ compliance with section 6.3 of the Code (the requirement to provide an annual notice in writing each year prior to the anniversary of the life insurance policy).
- Publish the Annual Industry Data and Compliance Report.
- Engage extensively with subscribers about issues including compliance reporting, data quality, Code practices, culture and corporate governance, and the COVID-19 pandemic.
The Annual Report also provides a summary of subscribers’ compliance with the Code, drawn from an aggregation of subscribers’ data and insights from the Committee’s Code compliance monitoring work.
Significant breach numbers fell 25% from the previous year
Subscribers reported 33 significant breaches of the Code during the year – 11 fewer than in 2019–20. The Committee reviewed 48 (including some that were reported in previous years) and confirmed 38 as significant Code breaches. Of the 33 significant breaches reported during the year, 15 concerned claims handling, while a further 12 concerned policy changes and cancellation.
Breach allegations rose 17% as customers’ awareness of the Code increased
The number of Code breach allegations received or identified by the Committee increased more than 17% – up from 127 in 2019–20 to 149 in 2020–21. As in previous years, most of these breach matters concerned the Code’s claims and complaints handling obligations. Almost two-thirds of the alleged Code breaches received this year were referred directly by customers. In 2019–20 less than one-third of alleged Code breaches came directly from customers.
In 2020–21, the Committee assessed 294 breach allegations some of which were made in prior reporting periods. Of all the breaches assessed during the year, 104 were determined as Code breaches.
Committee Chair Jan McClelland AM said:
“The Committee acknowledges the commitment of subscribers to the timely and effective resolution of identified breaches of the Code, and we appreciate subscribers’ cooperation and assistance in providing data and information about their processes and systems to support continuous improvement of industry practice. However, the number and nature of breach allegations this year indicates areas for improvement, particularly in relation to subscribers’ self-reporting of significant breaches and compliance with the Code’s claims and complaints obligations.”
“Despite consistent pleas from the Committee for subscribers to ensure their breach detection processes are robust, we have once again seen subscribers report low numbers of significant breaches, yet our active monitoring continues to result in previously unidentified significant breaches. This is disappointing given the number of guidance resources we have provided for subscribers to help them strengthen these processes.”
“Similarly, we had hoped to see fewer breach allegations relating to the Code’s claims and complaints obligations considering our recent focus on subscribers’ compliance with Code sections 8.16, 8.17 and 9.10 regarding timeframes for processing and finalising claims and complaints. It was therefore disheartening to note that between them, these three Code sections accounted for 30% of all alleged Code breaches for the year.”
“The Committee encourages subscribers to review the existing guidance resources available on our website including our recently published Guidance Notes for complying with the Code’s claims and significant breach obligations.”
“With life insurance customers becoming more aware of their consumer rights and the role of the Code in protecting those rights, and with ASIC set to tighten regulations around internal dispute resolution2 and claims handling for insurance products3 in the coming months, these resources will prove invaluable for helping subscribers to meet their Code obligations.”
1 A Determination is a decision of the Committee, following an investigation into an alleged breach of the Code. The Determination contains details of the breach circumstances, the Committee’s interpretation of the relevant Code section(s) and the Committee’s reasoning for its findings and conclusion. Determinations are published to all subscribers on a de-identified basis for information and education purposes.
2 ASIC’s RG 271 Internal dispute resolution
3 ASIC’s Information Sheet INFO 253