Life insurers’ proposed changes to mental health cover represent “a step back” from the industry’s current commitments, code reviewer Peter Kell says in an interim report.

Under the current code, insurers are required to design new products that do not contain blanket exclusions specific to mental health in standard form contracts.

But a Council of Australian Life Insurers supplementary submission to the code review last month set out the industry’s preferred position.

The council recommended that life insurers’ commitment to comply with the Disability Discrimination Act – which was in the earlier 2017 code – should be reinstated.

Exemptions in that act allow an insurer to refuse cover to a person with a disability or offer different prices or terms if their decision is based on actuarial data that is considered reasonable.

“It has become evident during the consultation process that there are different views on the nature of the existing code commitment … relating to blanket mental health exclusions,” the interim report, released on Friday, says.

“This has implications for how the commitment on this issue should be framed going forward.”

The report says reinstating the commitment to comply with the Disability Discrimination Act “would mean that exclusions or limitations would be allowed if there is relevant supporting evidence. This is, in effect, a step back from the current commitment that goes beyond the requirements of the DDA.”

Mr Kell notes the industry’s position is “based on a strong view that it will be financially unsustainable to deal with the growth and prevalence of mental health claims solely through individual underwriting decisions.

“CALI’s supplementary submission contains a range of industry-level claims data as well as population health data to illustrate the growing impact of mental health conditions on insurance claims and the broad challenges this raises for the sustainability, affordability and accessibility of life insurance.”

Mr Kell has made 72 recommendations and is seeking further feedback by May 8. A final report will be provided to CALI by June 30.

CALI CEO Christine Cupitt says the industry welcomes the report.

“This independent review is an important part of our industry’s promise and commitment to the people we protect every day,” she said.

“It provides a robust, independent process to hear a broad range of views about how we can continue to ensure our industry lives up to the expectations of the community.”