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New Life Insurance Code of Practice
By Chris Volpi
8th May 2023
On 1 July 2023 a new Life Insurance Code of Practice (“Life Code”) will take effect. The Life Code replaces the existing code of practice which first came into operation in 2017.
The Life Code is owned and published by the Financial Services Council (‘FSC’) and has been developed in collaboration with the life insurance industry. The code has various objectives, including ensuring that life insurance companies provide consumers with a high standard of customer service, that they communicate with consumers in plain language and to increase the trust and confidence of the life insurance industry.
The existing code and the Life Code applies to all life insurance companies who hold a membership with the FSC. It also applies to non-FSC members who adopt the code. The code covers various life insurance products including life insurance, total and permanent disability (TPD), trauma/critical illness insurance and income protection/salary continuance.
The Life Code introduces 50 additional consumer protections. These include banning the use of cooling off or deferred premiums, preventing insurers from refusing to provide a quote, addressing pressure selling techniques, training of life insurance employees, banning coercive retention techniques, providing broader support for vulnerable consumers, and providing clear explanations about premium structures.
The Life Insurance Code Compliance Committee (‘Life CCC’) which is operated and funded by the Australian Financial Complaints Authority (‘AFCA’) monitors the Life Code. If an insurer breaches the Life Code, the Life CCC can issue sanctions, such as requiring the insurer to take steps to correct the breach in a set timeframe, put out corrective advertising or make a Community Benefit Payment of up to $100,000 to a charity.
While the Life Code does strengthen the broader financial services consumer protection framework, it only creates legal rights between life insurance companies that are bound by the code and the FSC. It does not create rights for any other parties, such as consumers. This means that the Life Code does not provide an avenue for consumers to pursue an insurer for losses suffered because of a failure to comply with the code.
Consumers however can still pursue an insurer for compensation through the wider consumer protection regime, such as for breaches of the Australian Consumer Law. Consumers can also seek compensation by lodging a complaint with AFCA.
At wilson/ryan/grose Lawyers, we can assist with all aspects of claims relating to life insurance companies, including applying for income protection and TPD, and appealing an insurer’s decision to deny an income protection or TPD claim.
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