Home / Life Insurance / New life code carries $100,000 penalty for 'significant' breaches
27 June 2022
The Life Insurance Code of Practice has been updated with more than 50 new consumer protection measures, including a financial penalty of up to $100,000 for some significant breaches in the form of a community benefit payment to a charity, the Financial Services Council (FSC) said.
As part of the code changes, the Life Code Compliance Committee will have increased powers giving it the authority to decide if a breach is significant enough to warrant a financial penalty or other sanctions such as putting out corrective advertising.
Other key improvements relate to pressure selling, premium disclosure, support for vulnerable customers, surveillance and medical definitions.
The new Code also bans blanket mental health exclusions in the standard terms and conditions on all newly designed contracts.
FSC says the new Code will take effect on July 1 next year, with a 12-month transition for subscribers to make the necessary system changes.
The changes to the Code, its first since the FSC introduced it in 2016, follow a public consultation last year with stakeholders including submissions from consumer advocacy groups.
“The Life Code introduces a range of improved consumer protections, especially when Australians need to claim on their life insurance policy, such as ensuring claimants are supported if they need to be interviewed and further restrictions on the use of surveillance,” FSC CEO Blake Briggs said.
The finalisation of the new Code comes as a number of life insurers – who are also FSC members – announced they will set up a new peak body called the Council of Australian Life Insurers (CALI) to advocate on their behalf.
FSC says the Code is mandatory for all of its life insurance members and a spokesperson says it will “work collaboratively with the life insurance industry to ensure the important consumer protections in the Code continue to apply” across the industry.
“Whilst it is open to every individual insurer to determine what representation arrangements best suit their organisation, there is universal agreement that the important consumer protections in the Life Code continue to apply to the whole sector, and this is the FSC’s priority,” the spokesperson told insuranceNEWS.com.au.
Here are some key Code improvements:
Click here for more about the new Code.