Life insurance code inquiry into review of medical definitions

blurred photograph of medicine

The Life Code Compliance Committee (the Life CCC) – the independent body that administers and enforces the Life Insurance Code of Practice (the Code) – released its report on the Own Motion Inquiry (OMI) into how subscribers are meeting Code requirements on the review of medical definitions. Section 3.2 relates to the obligation that medical definitions in on-sale policies be reviewed and updated (if necessary) at least every three years in consultation with medical specialists. It also requires Code subscribers to communicate updates to customers (other than for Group policies).

Given the pace of advancements in the medical profession, it is vital that the industry keep up to date with new medical developments to ensure definitions do not result in unfair outcomes for customers. The obligations set out under this section reflect this important consumer protection.

The OMI results revealed a reported 100% compliance rate across the elements of section 3.2 – that is, all relevant subscribers had reviewed (and where appropriate updated or scheduled to update) the medical definitions for their on-sale products within the required 3-year timeframe, the reviews had involved consultation with relevant medical specialists and all updated medical definitions have been communicated or are slated to be communicated to customers. The Committee is reassured by these overall OMI results and about the ongoing ability of Code subscribers to maintain this good practice in the future, given the evidence of robust processes and systems to monitor compliance with the Code.

However, detailed analysis of the data by the Committee identified some inconsistencies in practice and opportunities to improve aspects of the processes by which subscribers achieve compliance, particularly in relation to the timeliness of updating revised medical definitions and the communication of changes to customers. Accordingly, 7 recommendations are made in this report, aimed at improving overall industry practice for the benefit of customer outcomes, and subscribers are encouraged to adopt these recommendations where relevant.

You can access the Committee’s report in full, here.