A new report from the Life Code Compliance Committee (LCCC) has revealed the dramatic impact of the government’s Protecting Your Super laws on the life insurance industry, with the amount of life cover in force dropping by 20 per cent in just 12 months.
The LCCC’s Annual Industry Data and Compliance Report 2019-20 revealed that following the introduction of Protecting Your Super and the Putting Members’ Interests First laws, which cancelled a range of group insurance policies held by younger super fund members and those with inactive accounts, covers in force across the life industry had dropped 20 per cent from 40.9 million in 2018-19 to 32.6 million in 2019-20.
“Group cover was particularly affected by the new superannuation laws, and the industry experienced a 23 per cent reduction in covers during the year,” the report stated.
The report also found that the disruption of the COVID crisis had had a profound impact on insurers’ ability to process claims, with claim-related complaints rising 40 per cent year-on-year, and the majority of these relating to the time taken to process complaints. Code subscribers overall received around 900 more complaints than in the 2019 financial year.
“We acknowledge the operating challenges faced by Code subscribers during the reporting period, particularly the COVID-19 impacts during the last quarter, but we remind subscribers that the obligations built into the Code are especially important during difficult times,” LCCC chair Anne Brown said.
“The code guides subscribers’ decision-making towards outcomes that are fair, respectful, transparent and timely for all customers but particularly those who are vulnerable or may be experiencing financial hardship. In this context, demonstrated compliance with the code has never been more crucial.”
Around 75 per cent of all code breaches reported by insurers related to claims, compared to 41 per cent in the 2019 year. Code subscribers reported that 93 per cent of all isolated breaches were caused by people, with 34 per cent of these relating to human error and 32 per cent caused by staff failing to follow established procedures.
“We are concerned to note that some of the issues we flagged in last year’s report – such as the high number of isolated breaches of the code attributed to people-related causes – do not appear to have been addressed by all subscribers,” Ms Brown said.
“The committee knows that some subscribers have worked hard to improve their code competency frameworks, including their training, monitoring and breach correction processes. However, we also know that other subscribers need to improve in this area. We therefore urge all subscribers to conduct an analysis of their training, monitoring and breach correction processes to look beyond who or what caused the breach to find out why the breach occurred.”
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