Insurer sanctioned for failing to inform customers of review rights - Life Code Compliance Committee

18 Jun 2025 12:00 PM

The Life Insurance Code Compliance Committee (Life CCC) has sanctioned a life insurer for failing to clearly inform customers of their right to have a declined insurance decision reviewed, a key obligation in the Life Insurance Code of Practice.

The failure, a breach of the Code, affected 170 customers who received letters which incorrectly stated that the insurer’s decision to decline coverage was final and could not be reviewed.

The Life CCC found the letters to be ambiguous and contradictory and determined that they did not meet the Code’s standards for clarity, fairness, or plain language.

Chair of the Life CCC, Jan McClelland AM, highlighted the significance of the failure.

“The right to ask for a review is fundamental. When someone is told they can’t get insurance, they need to know what their options are – clearly and without confusion,” Ms McClelland said.

“This insurer’s letter told people the original decision could not be reviewed unless the customer provided new information when it wasn’t true. That goes against the expectations in the Code and is simply not good enough.”

The Committee also found that the insurer’s internal processes failed to detect or correct the issue. The flawed letter had been reviewed and cleared by the insurer’s established governance review process. Updated versions intended to fix the problem still did not meet the Code’s requirements.

“Insurers need strong internal systems that work in practice,” Ms McClelland said.

“In this case, the checks and balances didn’t work, and customers were the ones left in the dark.”

The Life CCC was also concerned by the insurer’s initial response, which indicated a reliance on financial advisers to contact affected customers, rather than the insurer communicating with them directly.

“Insurers have an obligation to inform their customers,” Ms McClelland said. “While advisers can play an important role, they’re not a substitute for clear, timely information directly from the insurer. Customers shouldn’t have to go through a third party to find out what their rights are.”

As part of the sanction, the Life CCC will require the insurer to undertake an audit of all its relevant decision letters and operator scripts to ensure they comply with the Code. The insurer must also share the audit’s terms of reference and relevant findings with the Life CCC.

The insurer was not named in this sanction in recognition of the role of the advisors in the original applications, as well as the insurers subsequent efforts to contact all affected customers and rectify the failures.

“This decision sends a clear message to the industry,” Ms McClelland said. “Having the right systems in place and using them properly is essential to treating customers fairly and upholding the integrity of the Code.”

The Life CCC continues to monitor industry compliance and expects insurers to take proactive steps to ensure they are meeting their obligations to customers.

Read the case summary.

About us:

The Life CCC is an independent body established to monitor compliance with the Life Insurance Code of Practice. Our purpose is to ensure consistent and high-quality service standards are maintained for the benefit of consumers. This also works towards increasing trust and confidence in the life insurance industry.

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