Almost 38 million life insurance cover types were in force at 30 June 2018, according to the inaugural Annual Industry Data and Compliance Report compiled by the Life Code Compliance Committee (LCCC).
The report is based on information provided by subscribers to the Life Insurance Code of Practice).
Death (41%) and total and permanent disability (TPD) (33%) were the predominant types of life insurance cover in force, which many Australians retain through their superannuation fund.
The report found that subscribing life insurers:
- assessed 131,271 claims in 2017–18, more than one-third (37%) of which were for disability income insurance. TPD (17%) and death (16%) cover claims were the next most common;
- decided 89% of income related claims and 92% of non-income related claims within the required timeframes;
- reported 15,011 consumer complaints, of which almost half (48%) related to policy issues, and one fifth (20%) to claims issues;
- distributed 5% of products via third parties, whose activities are not covered by the Code. The next version of the Code is expected to go some way to addressing this gap, and in the meantime, the LCCC urged subscribers to take accountability for the relevant conduct of third-party distributors; and
- reported 164 breach events (multiple breaches of the Code), and almost 8,000 isolated breaches. While almost 1.8 million customers were potentially impacted by a Code breach, the overwhelming majority (over 92%) related to transition issues, where subscribers were not able to update legacy policies and IT systems to be fully Code compliant by the time they adopted the Code. Given that subscribers had nine months to transition to the Code, the number of events and consumers potentially impacted by transition-related breaches was disappointing.
Independent Chair of the LCCC, Anne Brown, said “the LCCC noted good buy-in to the data collection process, but some inconsistent quality of data, compliance documentation and processes”.
“Whilst subscribers appear committed to improved adherence to the Code, we encourage subscribers to review and enhance the robustness and effectiveness of their Code compliance frameworks,” she said. “Despite some data limitations in this inaugural year, we consider that the Report provides a valuable overview of industry compliance activity, and a reasonable baseline from which industry can progress.”
The Life Insurance Code of Practice came into effect on 30 June 2017. The Code, which is independently monitored by the LCCC, is binding on life insurance companies who are members of the Financial Services Council. Subscribers can be sanctioned if they do not correct Code breaches.
A copy of the report can be obtained here.