An insurance lawyer says the FSC’s Life Insurance Code of Practice is a missed opportunity to fix serious, systemic problems in the industry.
Slater and Gordon insurance and superannuation national practice group leader, Andrew Weinmann, says the code, while an improvement on the status quo, does not go far enough.
“The code has many loopholes, exceptions and carve-outs, and does not place enough clear and hard obligations on insurers,” Mr Weinmann said in a statement.
“While some aspects of the final code are an improvement on the status quo, having considered the code, we must conclude that on the whole it is disappointing.
“It falls short of reasonable community expectations about how insurers should behave.”
Mr Weinmann raised concerns with the code’s requirement for insurers to make decisions on income protection claims within two months of the end of the waiting period and decisions on total and permanent disability claims within six months of the end of the waiting period.
“We believe the time frames should be 45 days for income protection claims and three months for total and permanent disability claims,” he said.
“We are also concerned that the code states that the time frames do not apply to ‘unexpected circumstances’, a term that is so broadly defined that we believe that insurers will be able to avoid the time limits in the majority of cases.”
Mr Weinmann added that his firm’s analysis of disability insurance claims won for clients during the 2015-16 financial year revealed an unacceptable level of delay.
“Only around half of all these claims were approved within six months of being lodged,” he said.
“People making total and permanent disability and income protection claims are very unlikely to be working and many of them will have no income.
“Delaying their claims can lead to severe financial hardship and mental illness.”