The Financial Services Council (FSC) has launched the life insurance sector’s first-ever industry-led consumer Code of Practice. The Code is mandatory for FSC members who must be fully compliant by 1 July 2017.
In a statement, the FSC, which represents life insurers, financial advisory networks, funds management firms and licensed trustee companies, said that the Code will ensure that insurance practices and obligations are lifted substantially to better meet consumer needs and expectations.
The Code is governed by an independent body which will ensure compliance. It requires insurers to improve disclosure to customers, provide greater transparency in communications, decide claims within set timeframes, limit the use of surveillance, and provide additional support for vulnerable consumers.
The FSC has also developed minimum standard medical definitions for heart attack, stroke and cancer.
FSC CEO Sally Loane said: “Life insurers have come together to develop the Life Insurance Code of Practice as a demonstration of just how serious we are about improving our industry standards for the benefit of all Australians. We all want to strengthen trust.
“The Code is built on some fundamental principles - honesty, transparency, fairness and timeliness.”
The Code goes beyond the existing law in many areas, and fills in detail where the law is silent in relation to customer service, such as detailed plain-English disclosure, a requirement to review and update medical definitions, said the statement.
The Code is part of a broad package of reforms in life insurance over the past 18 months since Mr John Trowbridge, a former APRA member and independent expert, announced the findings of his investigation of the life insurance industry. The Trowbridge Report made recommendations to reform the industry including amending the adviser remuneration system to minimise conflict of interest.
Superannuation funds
The Code, however, does not apply to superannuation funds which are not members of FSC. This has led the superannuation industry to work on a set of industry standards for group life insurance which contributes 70% of total life business.
Five bodies representing super funds – the Financial Services Council, the Australian Institute of Superannuation Trustees, Industry Super Australia, the Association of Superannuation Funds of Australia, and Industry Funds Forum – issued a joint statement maintaining that life insurance in super is fundamentally the right policy and that “it can be improved”.