Consumer groups have welcomed the Council of Australian Life Insurers (CALI) response to the recommendations made by the independent reviewer of the Life Insurance Code of Practice, Peter Kell.

The Life Code plays an important role in consumer protection as it establishes standards of conduct for the life insurance industry, alongside the law- underpinning community trust.

Consumer groups commend the industry’s acceptance of a series of recommendations including:

• stronger obligations and protections to support people experiencing family and domestic violence
• not including terms that automatically exclude cover for all mental health conditions
• committing to more proactive and tailored support to financial difficulty, and
• strengthened obligations regarding unacceptable sales practices.

While CALI has supported the majority of recommendations – a number of key recommendations are still to be considered in the coming months before it finalises its response, and redrafts a new Life Code. These outstanding areas include mental health, claims handling and funeral insurance. Consumer groups are keen to ensure that the life insurance industry responds positively to address these important issues.

Quotes from Drew MacRae, Principal, Policy Development, Financial Rights Legal Centre

“It is pleasing to see life insurers taking a positive and collaborative approach to their code review response. Implementing these in a new stronger code will improve outcomes for consumers by reining in endemic delays in claims handling, improving communications practices and lifting the sector’s approach to people experiencing vulnerability.”

“We are particularly pleased to see CALI agreeing to prohibit each insurer’s standard form disability insurance contracts from excluding cover for all mental health conditions. This has been an important issue for many Australians and we look forward to working with CALI to implement this.”

“There are however a significant number of recommendations whose response has been ‘kicked into touch’ for further discussion and consideration over the next 6 months. These are centred on some of the more controversial matters including life insurers approach to mental health, funeral insurance and claims handling. It is one thing to say you’ll consider a recommendation further and another to act positively on those recommendations – so the sector is on notice to ensure that each one of those recommendations result in positive responses actively addressing these issues.”

“We also very much support the constructive and collaborative approach CALI are taking to the response and Code drafting with the establishment of the External Stakeholder Reference Group. CALI’s approach on this to date should act as a model for other financial services sectors in the development of their code.”

Quote from Meg Dalling, Assistant Director, Consumer Action Law Centre

“One of the areas that life insurers have deferred consideration on is funeral insurance. Peter Kell has produced clear recommendations to solve some of the worst excesses of this extremely problematic product – all of which are reasonable and easily implemented."

“We have long held concerns about funeral insurance, both the design of the product and the way it is sold, often with exploitative and predatory sales tactics which prey on people’s concerns about leaving family with funeral costs after they pass away- cultural factors can make this even stronger

“To this day we have people contacting us for help- sometimes they hold multiple policies for no reason, many are facing hardship because of rising premiums and many are paying premiums well over the value of the benefit their family will ever receive from the policy.”

“Fully implementing the independent reviewer’s recommendations would go some way to addressing these issues for future customers.”

“But for those with legacy funeral products, the case to fix funeral insurance has never been more urgent. We call on life insurers to recognise the fundamental flaws in these legacy products and establish a fair and comprehensive remediation program, ensuring no customer pays more in premiums than their family will receive in benefits, including refunding some customers for overpayment. Maintaining the industry’s social licence demands nothing less, particularly during a cost-of-living crisis.”

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