I write in response to Adele Ferguson’s article 'Self-regulation of life insurance is failing' (Australian Financial Review, Monday 1 April 2019).

The conclusion that the Life Insurance Code of Practice has ‘failed’ is contrary to the facts. The Royal Commission’s Final Report stated:

“…the Life Insurance Code of Practice has played an important role in addressing previously problematic behaviours within that industry. The two clearest examples related to reducing the use of surveillance of claimants and reducing the use of outdated medical definitions.”

ASIC’s submission to the review of the Life Insurance Code of Practice also supports the contention that the Life Code has “begun to see improvements in industry practices.”

References are made in the AFR article to 8,000 Code breaches and 15,000 complaints, but the author does not provide the context of how this compares to the large volume of transactions. There are 37.6 million cover types in force and with millions of interactions, it is hardly surprising that a small percentage of transactions would be subject to an error or complaint. 

Australia is the only nation in the world to compile and collect life insurance data and a recent report published by the Life Code Compliance Committee provides evidence of work being done to strengthen the sector. The report shows life insurers made decisions on 89 per cent of all income related claims and 92 per cent of all lump sum claims within the required timeframes.

It very important to note that mental health conditions rank third in the top 10 causes of claim across all life insurance categories. Population studies show, 22 per cent of all disabilities in Australians result from a mental health condition, similarly, KPMG data shows 20 per cent of all disability claims are due to a mental health condition. This shows overall Australian insurers are paying out mental health claims at the same rate as they are occurring in our community - in other words, they are not lagging.

It is clear evidence of self-regulation working.

Sally Loane, FSC CEO 

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