Australia: Australian Life Insurers Under The Spotlight….Again

Last Updated: 20 September 2016
Article by Avryl Lattin and Steven Donley

Efforts to reform the regulatory framework for the Australian life insurance industry show no sign of waning with Australia's Federal Parliament announcing last week that there will be yet another inquiry into the industry. Little regard seems to have been had to the fact that the life insurance industry has been involved in multiple inquiries over recent years, that it has already taken significant steps to reform its commission structures and that a new Code of Practice will commence shortly.

The Federal Parliament has referred a new inquiry into the Australian life insurance industry to the Parliamentary Joint Committee on Corporations and Financial Services. The committee has been provided with the following terms of reference:

  • the need for further reform and improved oversight of the life insurance industry;
  • assessment of relative benefits and risks to consumers of the different elements of the life insurance market, being direct insurance, group insurance and retail advised insurance;
  • whether entities are engaging in unethical practices to avoid meeting claims;
  • the sales practices of life insurers and brokers, including the use of Approved Product Lists;
  • the effectiveness of internal dispute resolution in life insurance;
  • the roles of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) in reform and oversight of the industry; and
  • any related matters.

The latest regulatory salvo comes at a time when ASIC's review of life insurance claims practices has not yet been completed (see our previous update here).

The further inquiry was proposed by Nationals Senator John Williams, who has been a vocal critic of Australia's life insurance industry. In March 2016 Senator Williams was a driving force behind the widening of the "Scrutiny of Financial Advice" inquiry's terms of reference to specifically examine the life insurance industry. The Scrutiny of Financial Advice inquiry lapsed with the recent federal election. The new inquiry will effectively take over, with the focus now being exclusively on the life insurance industry.

As can be seen from the terms of reference, the inquiry will be wide-ranging. Direct insurance, group insurance and retail-advised insurance will all be subject to review. Life insurance policies effected through superannuation funds will also be investigated. Even the role of the regulators, ASIC and APRA, in overseeing the industry will be considered.

Dates for filing of submissions and public hearings will be set shortly. Australian life insurers, financial advisors, life insurance distributors, industry groups and regulators may want to make submissions to the parliamentary inquiry so their views can be taken into account when the inquiry reports back to parliament next year.

Insurers will need to be able demonstrate to the parliamentary inquiry that they have embarked on a customer-focused upgrade of their product offerings, distribution methods and claims support services. In our previous update, we provided some practical advice as to how insurers can look to achieve best practice in claims management (see our previous update here).

The inquiry is to report back to parliament before 30 June 2017. Given the timing of the inquiry in the election cycle, it can be expected that further recommendations made by the inquiry will be translated into further regulatory reform within the current parliamentary term.

The new Life Insurance Industry Code of Practice just around the corner

The initiation of yet another inquiry does not seem to take into account that since ASIC's 2013-14 review into retail life insurance advice, and the further industry-initiated review led by John Trowbridge, the industry has voluntarily taken steps to change remuneration and commission structures and introduce a Code of Conduct.

The new Life Insurance Industry Code of Practice (the Life Code) has been developed by the Financial Services Council (FSC), the representative body for Australian life insurers and is expected to commence in October this year. A transition period will apply until 1 July 2017 when the Life Code will become binding on all FSC members.

Key provisions

The key provisions of the Life Code in its current draft form are as follows:

  • Compliance with the Life Code will bind all life insurers who are FSC members and any life insurers who voluntarily subscribe. The Life Code will apply to all products that are subject to regulation under the Life Insurance Act 1995 (i.e. term life, TPD, trauma, disability, funeral insurance, income protection, business expense and consumer credit insurance).
  • The Life Code places obligations on insurers to increase the standard of customer service in all aspects of the insurer's operations. The Life Code prescribes minimum conduct for insurers in the areas of: policy design and disclosure; sales practices and advertising; policy applications and underwriting; policy updates and changes; claims practices; dealings with third party service providers, and surveillance.
  • The Life Code requires life insurers to establish an internal complaints resolution process that meets the requirements of the Life Code. For retail policies, the life insurer must give the customer a final decision on the complaint within 45 days. Where the complaint relates to insurance owned by a superannuation trustee, the life insurer must provide the trustee with the assistance the trustee needs to respond to the customer complaint within 90 days.
  • The Life Code will apply to all of the life insurer's employees and authorised representatives. It will not apply to financial advisers who are not authorised representatives of the life insurer itself, which will be contentious given the sales practices identified for some advisers.The Life Code will also apply to reinsurers who are FSC members.
  • The obligations imposed by the Life Code will operate alongside, and are subject to, existing laws and regulations. The Life Code does not limit the customer's rights to pursue claims through external dispute resolution and the courts.
  • A Life Code Compliance Committee (Committee) will be responsible for monitoring and enforcing compliance with the Life Code. The Committee's composition and charter are still under development. The FSC will draft the Committee's charter.
  • Anyone can report alleged breaches of the Life Code to the Committee. Life insurers must self-report any "significant breach" of the Life Code to the Committee. The Committee must notify insurers of alleged Life Code breaches and the Committee can, at its discretion, investigate breaches.
  • Where a breach is established, the Committee will attempt to agree "fair and reasonable corrective measures" with the insurer. The Committee can impose sanctions including: requiring the insurer to take remedial action; issuing a warning; requiring the insurer to undertake a compliance audit; requiring the insurer to undertaking corrective advertising; and publication of the non-compliance.
  • The FSC will be responsible for the ongoing review and development of the Life Code, in consultation with industry regulators and stakeholders.

Life insurers will need to review all aspects of their operations, from product development, distribution, underwriting, through to claims management, to ensure they can achieve the minimum standards prescribed by the Life Code and that they have appropriate systems in place to monitor ongoing compliance.

Australian Life Insurers Under The Spotlight....Again

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.