Subscribers to the Life Insurance Code of Conduct may not fully report significant breaches after registering a 33% drop in breaches in 2021/22, according to the Code Compliance Committee.
The Life Code Compliance Committee states in its annual report that subscribers recorded 22 significant violations, up from 33 in the previous year.
It says significant breaches have decreased by at least 25% each year since 2019/20, and while the decrease can to some extent be explained by improved compliance frameworks, the committee is concerned about under-reporting by subscribers.
Another possible explanation for the decline is that “some subscribers continue to underreport material violations because they do not have sufficiently comprehensive processes and procedures in place to identify and report all material violations,” the report states.
The committee says its recent own-initiative investigations identified several significant violations that subscribers themselves had failed to discover as part of their regular compliance monitoring activities.
“We continue to see a discrepancy between the number of reported material violations and the number of allegations of violations that were referred to the Committee from other sources,” the report said.
“Subscribers promise consumers they have robust code compliance frameworks. We expect subscribers to be able to identify, record and manage all violations and to assess and report material violations within the timeframes provided by the Code.”
Life Code Compliance Committee Chair Jan McClelland says the industry needs to improve its monitoring and reporting process as it prepares for the transition to the new code, which goes into effect next July.
The new code introduces more consumer protections, allowing the committee to identify significant violations and sanction non-compliant subscribers.
“We strongly encourage all subscribers to review their compliance monitoring frameworks to ensure they are capturing all significant violations and have clear and strong processes in place for transitioning to the new Code,” said Ms. McClelland.
“While some insurers work very well with us and are actively trying to improve their performance, others need to improve their monitoring and reporting processes and systems.
“This will be particularly important as more than 50 changes to further protect customers will be implemented when the new life insurance code of conduct goes into effect in July 2023.”
Here are other key takeaways from the 2021/22 report:
- Half of the 22 reported significant violations were identified through the Committee’s own-initiative investigations
- The committee confirmed 35 major violations
- Approximately 41% of the significant breaches reported during the year were related to claims, of which 44% related to the timeframe for claims decisions and 56% to clarification of claims, points of contact and when the customer can expect to be contacted about the progress of the claim
- Around 51% of the material breaches confirmed by the Committee concerned claims
- About 41% of the reported major breaches related to contract modifications and terminations
Click here for the report.