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Life Code update expands consumer protections

The latest iteration of the Life Insurance Code of Practice features more than 50 new consumer protections, including a ban on blanket mental health exclusions and greater limits on surveillance.

The updated Code follows consultation with industry, consumer groups and regulators, the Financial Services Council said.

It is effective 1 July 2023, providing insurance with 12 months to make necessary changes to their processes to allow for the new consumer protections.

Protections have been added in several areas, including selling, underwriting, mental health, claims, and dealing with vulnerable customers.

Notably, the new Code introduces a ban on blanket mental health exclusions in new contracts. People with a mental health condition will also be treated as vulnerable and provided extra support. Meanwhile, vulnerable customers experiencing family violence will also be given greater support, including a requirement for life insurers to have a dedicated family and domestic violence policy on their website.

Also of note is new provisions around timeframes as they pertain to a claim to ensure claimants are paid promptly. This includes income-related decisions within two months, lump sum decisions being made within six months and a fixed five-day turnaround for internal approvals.

Also on claims, the new Code places further limits on surveillance of claimants, including a requirement to stop surveillance in the advice of any medical practitioner. A claimant can also not be under surveillance for more than four months and new restrictions will apply on business premises that are not open to the public.

When it comes to selling, to reduce instances of possible pressure selling, the Code places a ban on using cooling off or deferred premiums and a ban on refusing a quote. It is also tying salespeople's remuneration to good customer outcomes to ensure they're not incentivised to pressure sell. The updates also include extending the 30-day cooling off period for long-term policies and banning coercive retention techniques.

In underwriting, among other changes family history will be limited to first degree blood relatives and new wording around consent will limit access to patients' clinical notes.

Other new protections introduced include extended protections to more types of vulnerability, capping interview times during the claims process to 90 minutes and a ban on allegations of fraud without prior authority and a new approach to obsolete medial definitions in older policies.

Read more: Life Insurance Code of PracticeFinancial Services CouncilFSC