The Life Code Compliance Committee (the LCCC), the independent body that administers and enforces the Life Insurance Code of Practice, has released its Own Motion Inquiry report on subscribers’ compliance with the obligation for subscribers to provide customers with an annual notice in writing each year.
The annual notice serves to remind customers of their cover and prompt them to consider if their cover is appropriate for their current circumstances. The annual notice is often the only readily available source of information for customers regarding their life insurance policies and provides much needed clarity to customers on the specifics and cost of their cover. For example, if customers do not get the notice before the renewal date and they have not set up a direct debit or a direct debit is incorrect or has changed, their policy might inadvertently lapse. If customers cannot afford the premium, and they don’t receive the annual notice on time and with the required information, they miss receiving the prompt of contacting the insurer to discuss or consider whether the policy is still suitable. If all required information is not included in the annual notice, customers cannot assess if their policy is appropriate or affordable for their circumstances.
The inquiry found that 7.8 million notices were issued between 1 January 2019 and 31 December 2020, with 60% delivered by post and 40% by email. Most subscribers used automated processes to generate annual notices. The inquiry also found that there were 76 breaches of the obligation to provide the annual notice impacting almost 200,000 customers. Issues identified include:
- 29 of the 76 breaches were significant breaches. The 29 significant breaches impacted almost 180,000 customers, or more than 90% of all customers affected by the reported 76 breaches. 28 of the 29 significant breaches related to automated processes.
- 65 (86%) of the 76 breaches related to automated processes and 11 (14%) of the 76 breaches related to manual processes.
- 35 (46%) breaches related to not providing the notice prior to the anniversary of the due date, and 31 (41%) breaches related to not providing the correct information in the annual n otice.10 (13%) breaches involved both elements.
- System issues accounted for 42 (55%) breaches, human error accounted for 18 (24%) breaches, and compliance processes accounted for 16 (21%) breaches.
- Some subscribers did not identify and report some significant breaches prior to the inquiry, suggesting that some subscribers may not have robust processes and procedures in place for monitoring and identifying breaches
The LCCC made a number of observations and recommendations to support subscribers in ensuring compliance and implementing continuous improvement of their systems, processes and practices. The observations and recommendations focus on:
- Robustness of processes in relation to off-sale products
- Implementation of automated processes and monitoring and review of systems and processes
- Strengthened safeguards in relation to issuing of annual notices
- Reporting of significant breaches
The full inquiry report can be found on the LCCC website.
This article was written with information taken from an LCCC report.
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