The Life Insurance Code of Practice: subscribers, monitoring and AFCA

What the Code is

The Life Insurance Code of Practice is a binding standard for life insurers. It is published by the Financial Services Council (FSC) and applies to life insurers that have subscribed to it.

Subscribers to the Code commit to meeting specific obligations in their interactions with consumers. These obligations relate to the provision of retail life insurance products.

The Code operates alongside, and supports, existing regulatory requirements. It is independent of the statutory regime established under the Life Insurance Act 1995 and the regulatory framework overseen by the Australian Securities and Investments Commission (ASIC).

What the Code covers

The Life Insurance Code of Practice sets out standards for insurers to follow in several key areas. These standards address the sales process, ensuring clear, accurate and balanced disclosure of cover details, exclusions, and price. The Code also governs underwriting practices, including how medical information, mental-health questions, and genetic-test moratoriums are handled, aligning with the Financial Services Council’s moratorium standards.

The Code establishes requirements for claims handling, specifying timeframes for decisions, communication, and the provision of supporting documentation. It includes minimum standards for medically-assessed claims. Furthermore, the Code mandates vulnerability-aware practices and incorporates internal dispute resolution (IDR) processes aligned with ASIC RG 271.

Additional areas covered by the Code include provisions for policyholders experiencing genuine financial hardship, outlining available relief options. It also sets rules to support fair treatment when policies are cancelled, lapse, or reinstated.

Life Code Compliance Committee oversight

The Life Code Compliance Committee (LCCC) provides independent oversight of subscribing insurers’ adherence to the Life Insurance Code of Practice. This body’s primary function is to monitor compliance and ensure the Code’s effectiveness.

The LCCC undertakes various actions to achieve this oversight. These include investigating potential breaches of the Code, publishing data and case studies to highlight trends, and publicly naming subscribers found to be in breach. The Committee also has the authority to sanction breaches.

The LCCC’s work has demonstrably influenced the life insurance industry. Findings and reports from the LCCC have prompted industry-wide changes, particularly in claims practices and mental-health underwriting.

Customer remedies

Customers who believe an insurer has not met its obligations under the Life Insurance Code of Practice can initially raise a complaint with the insurer’s internal dispute resolution function. This process must adhere to the timeframes outlined in ASIC RG 271.

If the complaint remains unresolved after the insurer’s internal dispute resolution process, customers have the option of escalating the matter to the Australian Financial Complaints Authority (AFCA). AFCA is an external dispute resolution scheme and will consider whether the insurer has complied with the Code when assessing the fairness of the outcome.

Concerns regarding potential breaches of the Code can also be reported directly to the Life Code Compliance Committee.