The Financial Services Council has taken action to ensure consumer protections in life insurance will be significantly strengthened in light of recent industry issues.
At the annual FSC Life Insurance conference in Sydney, today (Wednesday) FSC CEO, Sally Loane announced that the Life Insurance Code of Practice, which is currently under development, would be made “even stronger”.
“We have added a Steering Group to our Code development process which will include consumer representatives, the Financial Rights Legal Centre and the Consumer Action Law Centre, as well as senior life insurance executives.
The consumer representatives will work closely with our members to identify where we need to strengthen consumer protections in our Code,” Ms Loane said.
As part of the industry’s response to the 2015 Trowbridge review, the FSC committed to having a Life Insurance Code of Practice in place by 1 July 2016.
The FSC has been consulting with a broad range of stakeholders over many months – including consumer organisations, peak industry bodies, advisers, legal aid and plaintiff lawyers, groups working with Indigenous communities, the Ombudsman, and relevant regulators – to develop a Code of Practice which will contain binding obligations that life insurers owe to consumers.
“We are developing this Code to show how serious we are about improving our industry for the benefit of customers and consumers. We want to re-build trust. We want Australians to understand that life insurance can and does measurably improve lives.” Ms Loane said.
“The Code has always been an important part of our commitment to strengthen community trust and confidence in life insurance. It will be an FSC standard, which means it is mandatory for our members, life insurance companies which write almost 100 per cent of life insurance premiums.”
The Code will be supported by robust governance via an independent governance framework, with compliance monitored by an independent committee of experts, including a consumer representative. This independent Committee will sit outside the FSC.
Improved disclosure and communication with consumers will be a central tenet of the Code. When a customer takes out a new policy, or when there are changes to a policy, key information will need to be provided in plain language, so they can properly understand what has been bought.
“The claims process is fundamental to the customer experience, when people are at their most vulnerable, so this has been a strong focus of our work in developing standards,” Ms Loane said.
“We are looking at the sort of additional support that vulnerable consumers may need if they are having difficulty with the process of buying insurance or making a claim. This could include identifying and supporting people suffering from mental illness, elderly customers, those who require the use of an interpreter, people living in remote communities, or those customers with very low levels of literacy.”
“Through self-regulation, the Code gives the industry the ability to update standards quickly to deal with changing conditions,” Ms Loane said.
Further reforms to life insurance, a result of the Trowbridge process, is currently before Parliament. The Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 considerably reduces high up- front commissions and seeks to improve the quality of advice consumers receive by regulating conflicted remuneration while at the same time recognising the value of advice and the important role of advisers and life insurance advice.
“The Bill has bipartisan support and is currently before Parliament. We urge its swift passage,” Ms Loane said.
