A life insurer has been told to audit its decision letters on applications for cover after the industry’s code compliance committee found 170 rejected customers were not informed of the right to have their cases reviewed.

The unnamed insurer reported an initial breach in November 2023 involving a template letter that failed to include information on customers’ ability to provide additional details or their review and complaint options.  

The insurer issued an updated letter to fix the problem, but this also failed to meet the Life Insurance Code of Practice’s standards, according to the compliance committee.

“The insurer told customers who were declined insurance cover that the decision could not be reviewed, and that ‘the assessment was final at this time’,” the committee said.  

“While the rest of the letter implied that a review might be possible, we found the insurer’s communication was ambiguous and contradictory and did not adhere to the code standards of clarity, fairness and plain language.”  

Committee chair Jan McClelland says affected customers were denied a “fundamental” right.  

“When someone is told they can’t get insurance, they need to know what their options are – clearly and without confusion,” she said.

“This insurer’s letter told people the original decision could not be reviewed unless the customer provided new information, when it wasn’t true.”  

The committee also noted the insurer’s failure to detect or correct the issue through internal processes and its reliance on financial advisers to tell customers of the problem rather than directly contacting them.  

“In this case, the checks and balances didn’t work, and customers were the ones left in the dark,” Ms McClelland said.  

The insurer has been ordered to review all relevant decision letters and operator scripts and report its findings to the committee.

The committee has additional sanctioning powers, including a requirement to publish breach details on the insurer’s website and ordering a community benefit payment of up to $100,000.  

It says it has not named the insurer in acknowledgement of its efforts to address the issue.  

See the compliance committee’s case summary here.

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