The Life Insurance Code Compliance Committee (Life CCC) of Australia sanctioned a life insurer for failing to properly inform 170 customers of their right to request a review after being declined insurance coverage.
The insurer’s communication falsely stated that the decision was final and not subject to review, breaching the Life Insurance Code of Practice.
The letters sent to customers misrepresented the review process by indicating that reconsideration would only occur if new information was provided.
Life CCC found the messages unclear, inconsistent, and in breach of expectations related to fairness, plain language, and transparency.
According to Jan McClelland, Chair of the Life CCC, individuals denied coverage must receive accurate and understandable information about their available options. She criticized the insurer for misleading communication and stressed that this conduct did not align with the Code.
When someone is told they can’t get insurance, they need to know what their options are — clearly and without confusion
Jan McClelland, Chair of the Life CCC
“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,” McClelland said.
The insurer’s internal controls failed to detect or resolve the issue. Although the problematic letters were reviewed and approved by the company’s governance team, they remained noncompliant with Code requirements, even in revised forms.
The company’s decision to rely on financial advisers to reach out to affected customers instead of contacting them directly also received criticism from Life CCC.
As part of the sanction, the Life CCC instructed the insurer to conduct a full audit of all decision-related letters and operator scripts. The company must also provide the audit’s terms of reference and findings to the Life CCC for review.
Life CCC chose not to disclose the insurer’s identity due to the involvement of financial advisers in the original applications and the company’s actions to correct the error and reach affected clients.
