Strengthen Life Code for mental health crisis, claims handling: Review

The Life Insurance Code of Practice should be strengthened to reflect the growing mental health crisis, better support vulnerable customers and improve the claims-handling process.

These are the key themes that emerged in the newly published Life Insurance Code of Practice independent review Interim Report, which highlighted stakeholders' concerns about rising mental health claims and cited research that finds almost one in two Australians will experience a mental health condition in their lifetime.

One of the key recommendations is for the Life Code to contain "a new overall industry commitment" to deal appropriately with customers experiencing mental health conditions to be pushed at the top as a priority and not placed in the appendix, where it currently sits.

The report's author, Peter Kell, said this would provide the industry with an opportunity to set out its position on this issue more clearly and build on the existing commitments to take extra care and treat people with empathy, compassion and respect, which are in turn supported by specific commitments in the code.

Kell floated the possibility of removing the prohibition on blanket mental health exclusions and permitting design features in insurance policies that limit cover for mental health.

Currently, clause 2.1(b) of the code requires insurers to design new products that do not incorporate a blanket exclusion specific to mental health in the general terms and conditions of the standard form contract, consistent with obligations under the Disability Discrimination Act 1992 and equivalent state of territory laws.

The code's effectiveness in dealing with customers experiencing vulnerability, including commitments to First Nations customers or customers experiencing family violence, is also up for discussion.

The Life Code's reference to the disclosure of vulnerability "should be redrafted to emphasise the disclosure of the consumer's situation so as to identify their potential need for support.

As an example, clause 6.10 should read: "We encourage you to tell us about your circumstances so that we can arrange additional support to help you should you need this."

Kell wrote the overarching principle in the code should be for insurers to treat every customer interaction with the potential for vulnerability in mind, particularly during claims when customers are most likely to experience stress.

This is not a formal checklist, nor does it require customers to self-identify or disclose sensitive circumstances when they do not wish to. Rather, insurers proactively considering potential risk factors for vulnerability that may indicate the need for support.

"This can be based on information they already hold, additional information that is disclosed by customers, or in some cases information that can be the subject of reasonable inquiries," he explained.

Stakeholders also expressed the need to improve claims handling via the code. Clarifying or strengthening certain claims-handling timeframes, improving communication during the claims process and proving greater clarity and enhancing specific parts of the claims process, such as interviews and medical evidence, are some suggestions.

The timeframe in clause 5.5 can be reduced to five business days, for example, while clause 5.50 can be redrafted to require the insurer to tell the claimant about their decision within 15 business days and within the relevant claims-handling timeframe.

If an insurer reopens a claim under clause 5.57, the claims reassessment should be completed within one month for income-related claims or two months for lump sum claims.

Kell was appointed to lead the independent review of the Life Code, which kicked off on 1 October 2025. In response, he received 14 submissions in total.

The Council of Australian Life Insurers (CALI) chief executive Christine Cupitt commented the independent review is an important part of the industry's promise and commitment to the people we protect every day.

"It provides a robust, independent process to hear a broad range of views about how we can continue to ensure our industry lives up to the expectations of the community," she said.

"It is critical that the Life Code reflects the needs of our customers, keeps pace with changing laws and regulations, and is practical and easy to understand."

Kell is urging stakeholders to provide feedback on the interim report by May 8, the findings of which will formulate the final stage of the review.

The final report, including recommendations for changes to the Life Code, will be provided to CALI by June 30.

"The Life Code plays a vital role in supporting consumers in their dealings with life insurers, and this input has been critical in identifying areas where the Life Code is working well and where it can be strengthened," Kell said.

"The interim report sets out preliminary findings and provides an important opportunity for further feedback to help shape a modern, effective and consumer-focused Life Code."