Life insurers should be prepared to go beyond the hardship provisions of the Life Insurance Code of Conduct when dealing with people suffering financial hardship as a result of the COVID-19 pandemic, according to the Australian Securities and Investments Commission (ASIC).
In a letter sent to the life insurers late yesterday, the regulator said it “expects insurers to consider, where appropriate and reasonable, going beyond the hardship provisions of the Code and reviewing options for premium ‘holidays’ or deferrals for consumers who are no longer able to pay premiums due to reduced income”.
It said the same level of leniency was demonstrated by the life insurers in dealing with the summer bushfires and that it expected a similar approach could be adopted with respect to COVID-19.
“We recognise that some insurers introduced this type of flexibility in response to the tragic bushfires of summer 2019-20, and we consider a similar approach is just as important now, given the broad effect that the COVID-19 pandemic is already having on many Australians. We expect insurers to try to find workable options to allow consumers in hardship to continue their cover.
“ASIC also expects insurers to consider whether outcomes will be fair for consumers if they have to actively ‘opt in’ or make a request in order to receive any benefit insurers offer in response to the Covid Pandemic,” it said. “For example, consumers who are struggling to pay their insurance premiums may simply allow the policy to lapse rather than contact their insurer to cancel it. If an insurer relies on consumers to contact them to discuss options for retaining their cover, this can result in inconsistent and unfair outcomes for policyholders.”
“Vulnerable consumers will be under considerable stress – accordingly, for some benefits to be effective they may need to take effect automatically, without the need for any action by the consumer,” the ASIC letter said.
The letter said that insurers should also apply appropriate flexibility in their treatment of consumers whose personal and/or working conditions have changed as a result of the COVID-19 pandemic, “for example where these working conditions impact their income protection or TPD claim outcome”.
“In particular, insurers should proactively apply the urgent financial need provisions in sections 8.27 to 8.30 of the Code for all affected claimants, including consumers making a COVID-19 pandemic related income protection or TPD claim.”