LCCC urges life insurers to improve Code of Practice breach reporting

The independent body that monitors and enforces compliance with the Life Insurance Code of Practice says in its annual report that insurers need to improve compliance monitoring and reporting ahead of a revised Code with new sanctions.

While thanking subscribers for their active and constructive engagement with the Committee’s work, Chair of the Life Code Compliance Committee, Jan McClelland AM, raised concerns about underreporting significant breaches of the Code.

“We are seeing an increase in breaches reported by consumers and our own studies, yet we continue to see some subscribers report low numbers of significant breaches,” Ms McClelland said.

“This is a trend that has persisted over the last three years and suggests that not all subscribers have adequate breach detection processes. 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.”

Ms 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.

“We strongly encourage all subscribers to review their compliance monitoring frameworks to ensure they are capturing all significant breaches and have clear and strong processes for transitioning to the new Code.”

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.

Other highlights in 2021-22 included:

  • Publication of 41 Determinations (decisions on alleged breaches), three Guidance Notes and two case studies to help Code subscribers improve the quality and consistency of compliance reporting.
  • An Own Motion Inquiry into compliance with the obligation to issue an annual notice in writing before the anniversary of a policy.
  • An Own Motion Inquiry into compliance with obligations for the design and introduction of new life insurance policies.
  • Two Targeted Inquiries, examining compliance with certain sections of the Code related to claims-handling.

Drawing on data and insights from the Committee’s Code compliance monitoring work, the 2021-22 annual report provides a summary of compliance with the Code.

The 2021-22 annual report is available here.