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.
"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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