A new Life Insurance Code of Practice was introduced in Australia in December 2023. The Life Code of Practice (“the Life Code”) is a voluntary code of “best practice” principles developed by the life insurance industry. Most major life insurers are subscribers to the Life Code. This article will summarise key provisions of the Life Code which insurance claimants should be aware of.
What is the purpose of the Life Insurance Code of Practice
The primary purpose of the Life Code is to set out high standards of customer service which insurers are expected to adhere to. If an insurer breaches any of the standards in the Life Code, the Life Code enables insurance claimants to lodge a complaint with the Life Code Compliance Committee, who investigate breaches of the Life Code.
What types of insurance does the Life Insurance Code of Practice cover?
The Life Code covers the following life, disability and other insurance products:
- Total and permanent disability (TPD);
- Income protection (IP);
- Life insurance (death benefits);
- Terminal illness;
- Trauma insurance;
- Funeral insurance; and
- Consumer credit insurance.
Timeframes for a decision on disability insurance claims
The Life Code sets out the life insurance industry’s expected timeframes for decisions to be made on income-related claims, such as income protection (IP) claims and lump sum claims, such as total and permanent disablement (TPD), trauma or life insurance claims.
For income-related claims such as IP claims, the Life Code confirms it is expected a decision will be made on an income protection claim (or similar related claim) within 2 months of the later of:
- the date the insurer receives the first piece of information for your claim; and
- the end of your waiting period.
For lump sum claims such as TPD, trauma or life insurance claims, the Life Code confirms it is expected a decision will be made on a lump sum claim within 6 months of the later of:
- the date the insurer receives the first piece of information for your claim; and
- the end of your waiting period.
The waiting period is typically 3 or 6 months for a TPD claim and 3 months for a trauma claim. If you applied for your insurance cover, you may have elected to have a shorter or longer waiting period than this. Life insurance claims do not typically have a waiting period.
What can delay an insurer’s decision on a disability insurance claim?
The Life Code sets out an exception to the above timeframes, where there are “circumstances beyond our control”.
Circumstances beyond the insurer’s control can include any of the following:
- The insurer hasn’t received or had a reasonable time to assess medical reports, records, evidence or other information which they reasonably request.
- You haven’t responded to reasonable enquiries or requests for documents in a reasonable timeframe.
- The insurer has not had a reasonable opportunity to decide the claim after issuing a "show cause" or "procedural fairness" letter.
- The insurer hasn’t been able to contact you about your claim.
- You will be undergoing further treatment, rehabilitation or retraining, which means the insurer can’t make a final decision on your claim.
- You have requested a delay or extension to the claim.
- The insurer reasonably suspects there were non-disclosures or misrepresentations if you have applied for cover, which they believe may impact your claim and the insurer needs to further investigate this.
- The insurer reasonably suspects your claim is fraudulent and the insurer needs to further investigate this.
Insurer must inform claimants in writing of circumstances beyond their control
If it has been 2 months since your IP claim was lodged or 6 months since your TPD, trauma or life insurance claim was lodged, the Life Code requires the insurer to write to you to confirm that “circumstances beyond our control” apply and tell you about your right to lodge a complaint.
If any of the above “circumstances beyond our control” apply to your disability insurance claim, the insurer will not be considered to have breached the Life Code by failing to have made a decision within the timeframes set out in the Life Code.
However, there may be other sections of the Life Code which the insurer has breached, so you should still seek advice from our team regarding your eligibility to lodge a complaint.
What you can do if the insurer breaches the Life Insurance Code of Practice?
If your income protection claim has been in for assessment for more than 2 months, or your TPD, trauma or life insurance claim has been in for assessment for more than 6 months, you can lodge a complaint directly with the insurer regarding the delays.
You may also be entitled to lodge a complaint with the Life Code Compliance Committee regarding any breaches of the Life Code. The Committee considers complaints regarding the Life Code.
It is important to note that if you lodge a complaint with the Committee, this shouldn’t affect the ongoing assessment of your claim. If anything, by lodging a complaint with the Committee you may be able to apply pressure on the insurer to proceed to a decision on your claim.
The Committee will investigate your complaint and ask the insurer to explain why they have breached the timeframes for a decision to be made under the Life Code. When the Committee has finished investigating your complaint, they will write to you to set out the outcome of your complaint.
Remedies if insurer is found to have breached the Life Insurance Code of Practice
The insurer may be required to remedy their breach of the Life Code as a consequence of your complaint. From our experience, examples of remediation may include:
- The insurer’s case manager may receive feedback regarding the breach;
- The insurer’s case manager may be required to undergo formal performance counselling and performance monitoring;
- The insurer’s case manager may have to undergo training regarding the Life Code.
The Committee will sometimes refuse to investigate your individual complaint if they are already investigating an insurer regarding their systemic breaches of the Life Code.
Get help from a disability insurance lawyer
If there have been unreasonable delays in the assessment of your disability insurance claim and you need assistance lodging a complaint or you would like advice about whether you are entitled to lodge a complaint with the Life Code Compliance Committee, please contact our team for advice. We offer free advice so it costs you nothing to find out about your options.
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