Too many loopholes in life insurance code

The new Life Insurance Code of Practice has too many loopholes and is a missed opportunity to fix serious systemic problems in the industry, an insurance lawyer believes.

Slater and Gordon's insurance and superannuation national practice group leader, Andrew Weinmann, said while the code was an improvement on the status quo, it did not go far enough.

"The code has many loopholes, exceptions, and carve-outs and does not place enough clear and hard obligations on insurers," Weinmann said.

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"It falls short of reasonable community expectations about how insurers should behave."

Weinmann said the areas of concern of the code were time limits for insurers to make a decision, payment suspensions, rules on interrogations, surveillance and medical examinations, claims management, legal effect of the code, and applicability in superannuation.

He said the two month time limit for insurers to make a decision on income protection claims and six months for total and permanent disability (TPD) claims was not well addressed and that timeframes should be 45 days for income protection claims and three months for TPD claims.

"We are also concerned that the code states that the timeframes 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," he said.

Weinmann also noted that the code was not legally binding and would not provide protection to consumers when they needed it most, when push came to shove.

"Most Australians get life and disability insurance through their superannuation. Super funds play a big role in handling claims. The code is not binding on superannuation funds, but needs to be to provide comprehensive protection to insurance consumers," he said.




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Comments

Comments

Thanks for pointing this flaw out Andrew, well stated. From 29 years of experience we have had a very good claims track record with most insurers going out of their way to assist claimants, and this has been greatly appreciated. But of course this is retail (the bad insurance people). Not!
Seems to me that the Elephant in the room strolled into town when industry super fund begrudgingly had to offer insurance to members, and then it was a poultry $50,000 death only which gradually decreased as you became older, (why?).
Now this has changed and members can increase the cover but only in units representing $30,000 or $50,000 amounts (why?) But now because of these changes, FOFA included, it looks to me that the miss-pricing of risk premiums and the providers race to the bottom to gain market share, has back fired big time and now they are trying to get the members to pay for it and have used the Australian Prudential Regulator report into the solvency of these insurers as an excuse to hike premiums, we had one case where one group insurer tried to jack up a clients premium by 100%. That action has seen a push back by members back into retail and so now they are trying to screw advisers. How's that for unfettered market manipulation with the full agreement of the federal Government's blessing. This is shameful, disgraceful behavior and I would advise any person thinking about a professional career in financial planning to think twice and look at another profession without the crap we are expected to just accept without questioning.

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