A radical overhaul of the code governing the conduct and practices of Australian life insurers, which are members of the Financial Services Council (FSC), has been released for public consultation.
The draft FSC Life Insurance Code of Practice builds upon the original code in force since 2017 and is designed to lift standards in product design, sales, underwriting, customer service, complaints and claims handling.
In all, more than 30 significant changes have been made to practices that govern the way FSC member life insurers will treat customers under the new Code, which will take effect next July.
“Every aspect of the life insurance industry is under the microscope following the poor behaviour brought to light during the Royal Commission,” FSC CEO Sally Loane said, referring to an inquiry into the financial services sector. “We owe it to consumers to do a better job. Today with the release of the consultation draft of the second iteration of the Code, the life insurance industry is demonstrating it is serious about improving products, practices and governance to rebuild the standing of the sector.”
The author of the majority of the proposed changes affecting life insurers, FSC Senior Policy Manager Nick Kirwan, said, “The FSC has been working with ASIC and consumer advocates, and has met mental health groups, GPs and geneticists during the past 18 months to develop the new draft Code.
“We have worked with the overriding aim of making a positive difference to how consumers are treated when choosing and claiming on life insurance.”
Proposed changes to the new Code include:
- Banning pressure selling of products and coercive retention tactics.
- Banning medical disclosure checking without reasonable grounds.
- Ensuring customers are no better or worse off at claim time (excluding fraud).
- Improving funeral insurance to ensure people understand what they are buying.
- Separating consumer credit insurance (CCI) from credit product sales.
- Binding trustees of superannuation funds to the Code.
- Extending coverage of the Code to include all life insurance distributors.
Mr Kirwan said the draft Code also included the recently announced moratorium on genetics testing in life insurance. “From 1 July 2019, the life insurance industry plans to introduce a moratorium so that every Australian can get up to A$500,000 ($360,,000) of life cover without having to disclose an adverse genetic test result,” he said. “The moratorium will mean that people can take part in genetic research, or take a test individually, without fear that the result will stop them taking out life insurance.”
The Life Insurance Code of Practice is mandatory for all FSC member life insurers. The Code is enforced by the independent Life Code Compliance Committee which is administered by the new consumer complaints body, the Australian Financial Complaints Authority.
The FSC is a leading peak body which sets mandatory standards and develops policy for more than 100 member companies in Australia’s largest industry sector, financial services.