The Life Code Compliance Committee has sanctioned an unnamed insurer over “ambiguous and contradictory” rejection letters sent to policy applicants.

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 says 170 customers were affected. It has now ordered the life insurer to review all relevant decision letters and operator scripts and report its findings to the committee.

The 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.”  

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

See the compliance committee’s case summary here.