Recommendations

Recommendation 2.1

2.80    The committee recommends that life insurance be included in the open banking regime.

Consumer protections

Recommendation 3.1

3.89    The committee recommends that:

Recommendation 3.2

3.94    The committee recommends that ASIC engage with life insurers to begin removing unfair terms from life insurance contracts as soon as possible.

Recommendation 3.3

3.98    The committee recommends that ASIC's proposed product intervention powers be amended to:

Recommendation 3.4

3.102    The committee recommends that the government's proposed Banking Executive Accountability Regime, financial product design and distribution obligations, and financial product intervention powers for ASIC, should apply to life insurance and life insurers.

Recommendation 3.5

3.106    The committee recommends that the scope of the Banking Executive Accountability Regime be extended to include consumer related conduct matters and enable ASIC powers to take action on these matters.

Recommendation 3.6

3.112    The committee recommends that the penalty amounts under ASIC-administered legislation, including the life insurance industry, should be set at three times the benefits obtained for every party to the transaction, including advisers, licensees and insurers.

Recommendation 3.7

3.113    The committee recommends that ASIC conduct random audits of 20 per cent of the life insurance adviser population over a three year period. Where misconduct is identified, appropriate entries should be recorded on the financial advisers register, and statistics on licensees and insurers should be published, so the public can be informed. Advisers that have been reviewed must also publish the outcome on their website in a highly visible location. If necessary ASIC should be provided with additional funding to allow these random audits to occur.

Codes of Practice

Recommendation 4.1

4.52    The committee recommends that the government implement the co‑regulatory approach put forward in the ASIC Enforcement Review Taskforce Position Paper across the whole financial services sector, while ensuring, where possible, that there are no exemptions for any part of the life insurance industry and that codes are written in plain English.

Recommendation 4.2

4.58    The committee recommends that ASIC be given the power to undertake enforcement action (halting misconduct, remedies and sanctions) in relation to systemic or systematic breaches of codes of practice in the financial services sector, including in the life insurance sector.

Recommendation 4.3

4.61    The committee recommends that, in order for ASIC to approve any code of practice in the financial services sector, including life insurance, the code must apply to all relevant industry participants, without exemptions.

Recommendation 4.4

4.63    The committee recommends that, prior to seeking ASIC approval, the two codes of practice for the life insurance industry be combined into a single code of practice if possible.

Remuneration, commissions, payments and fees

Recommendation 5.2

5.105    The committee recommends that:

Recommendation 5.3

5.108    The committee recommends that ASIC and APRA immediately undertake an audit of all superannuation trustees to identify the nature, purpose and value of all payments, including any 'soft-dollar' benefits that occur between life insurers and trustees or any related parties in connection with the provision of default insurance to members of MySuper and choice superannuation products, including:

5.109    The committee also recommends that the report be published by ASIC and APRA as soon as practical to ensure confidence in the compulsory superannuation system.

Retail life insurance and approved product lists

Recommendation 6.1

6.45    The committee recommends that the life insurance industry should have, as a matter of urgency, a balance of affiliated and non-affiliated products on their approved product lists, and if affiliated products are recommended, the affiliation should be disclosed, and the customer should be given a comparison with non-affiliated products. Beyond this, the committee further recommends that the industry transition to open approved product lists.

Recommendation 6.2

6.48    The committee recommends that ASIC and the ACCC jointly investigate whether the past use of APLs in the life insurance industry breaches any anti‑competitive laws they administer. The report of the investigation should also inform government whether the current legislation inappropriately constrains the capacity of ASIC or the ACCC to investigate anti-competitive behaviour in the financial service sector, including life insurance.

Group life insurance

Recommendation 7.1

7.41    The committee recommends that trustees that have access to information on accounts that are duplicate, have low balance risks or lack contributions, should be required to contact members annually to inform them, in summary form and in plain English, of:

7.42    The committee further recommends that, in addition to annual notification, trustees should be required to contact members in a timely manner when trigger points such as low balance risk are reached.

Recommendation 7.2

7.47    The committee recommends that superannuation funds should be required to inform the Australian Tax Office of the type and status of the insurance that is held for the benefit of the member for each of their superannuation accounts.

Recommendation 7.3

7.48    The committee recommends that, when it sends out individual annual tax assessments, the Australian Tax Office also provide a statement of superannuation and insurance, subject to system capacities and cost effectiveness, including information on:

Recommendation 7.4

7.52    The committee recommends that the life insurance industry fund a prominent media advertising campaign, particularly aimed at those most vulnerable to duplicate accounts and fee erosion, to alert consumers to:

Recommendation 7.5

7.53    The committee recommends that the government appoint the appropriate existing body to undertake an immediate review of all superannuation trustees to determine their compliance with existing obligations under the Superannuation (Industry) Supervision Act 1993, including section 52(7)(c) covenants, 'to only offer or acquire insurance of a particular kind, or at a particular level, if the cost of the insurance does not inappropriately erode the retirement income of beneficiaries'.

Recommendation 7.6

7.54    The committee recommends that, the Australian Government consider legislating to protect the retirement savings of members with low account balances and members who do not receive any value from default insurance.

Recommendation 7.7

7.55    The committee recommends that the Australian Government consider legislating to require life insurers and superannuation funds to provide regular updates to policyholders of the level, type, extent and cost of life insurance cover that they have using a standard form disclosure format, enabling them to compare with other funds or, in the case of superannuation, make them aware that they have access to life insurance.

Access to medical information

Recommendation 8.1

8.93    The committee recommends that:

Recommendation 8.2

8.94    If the Financial Services Council and the Royal Australian College of General Practitioners have not agreed to protocols within six months, the committee recommends that at the time of application, life insurers must only ask a consumer's General Practitioner, or other treating doctor where relevant, for a medical report specific to the consumer's relevant medical conditions. In circumstances where such a report cannot be prepared, life insurers cannot ask for access to clinical notes regarding the consumer/policyholder.

Recommendation 8.3

8.95    If the Financial Services Council and the Royal Australian College of General Practitioners have not agreed to protocols within six months, the committee recommends that at the time of a consumer/policyholder making a claim, life insurers can only ask a policyholder's General Practitioner, or other treating doctor where relevant, for a medical report that is specifically targeted to the subject matter of the claim. In circumstances where such a report cannot be prepared, life insurers cannot ask for access to clinical notes regarding the consumer/policyholder.

Recommendation 8.4

8.96    If the Financial Services Council and the Royal Australian College of General Practitioners have not agreed to protocols within 6 months, the committee recommends that life insurers must obtain consent from a policyholder each time it intends to:

Recommendation 8.5

8.97    The committee recommends that the Financial Services Council, in discussion with the Royal Australian College of General Practitioners, update the Life Insurance Code of Practice and relevant Standards to reflect Recommendations 8.1, 8.2, 8.3, and 8.4.

Recommendation 8.6

8.98    The committee recommends that if insurance contracts are to be subjected to consumer protections, including laws on unfair contract terms:

Recommendation 8.7

8.99    The committee recommends that it become the practice of life insurers to institute real-time disclosure that would allow consumers to track the progress of their claim.

Genetic information

Recommendation 9.1

9.98    The committee recommends that the Financial Services Council, in consultation with the Australian Genetic Non-Discrimination Working Group, assess the consumer impact of imposing a moratorium on life insurers using predictive genetic information, unless the consumer provides genetic information to a life insurer to demonstrate that they are not at risk of developing a disease.

Recommendation 9.2

9.99    The committee recommends that the Financial Services Council make any updates as necessary to Standard 16—Family History and the Life Insurance Code of Practice to support the recommended changes to Standard 11—Genetic Testing Policy as outlined in Recommendation 9.1.

Recommendation 9.3

9.100    The committee recommends that life insurers be banned from using predictive genetic information while the Financial Services Council is updating Standard 11—Genetic Testing Policy, Standard 16—Family History, and the Life Insurance Code of Practice to align with Recommendation 9.1.

Recommendation 9.4

9.101    The committee recommends that if the Financial Services Council and life insurers have adopted a moratorium on the use of predictive genetic information as outlined in Recommendation 9.1, the Australian Government should continue to monitor developments in genetics and predictive genetic testing to determine whether legislation or another form of regulation banning or limiting the use of predictive genetic information by the life insurance industry is required.

Claims handling

Recommendation 10.1

10.13  The committee recommends that the Australian Government review Corporations Regulation 7.1.33 to ascertain whether the exemption provided by this regulation limits in any way ASIC's ability to oversight the claims handling processes of insurance companies.

Recommendation 10.2

10.21  The committee recommends that a requirement be inserted, where necessary, into both the Insurance Contracts Act 1984 and the Disability Discrimination Act 1992 to the effect that an insurer must provide a person with written reasons when an application for insurance has been rejected or an insurance claim denied. The committee further recommends that the written reasons be provided as a plain English summary of such evidence and be targeted to the part of a person's medical history relied on by the insurer. The committee also recommends that the statistical and actuarial evidence and other material relied on by the insurer be available on request.

Recommendation 10.3

10.60  The committee recommends that in relation to definitions in life insurance policies, the life insurance industry must:

Recommendation 10.4

10.61  The committee recommends that the Financial Services Council's Life Insurance Code of Practice be updated to reflect Recommendation 10.3.

Recommendation 10.5

10.62  The committee recommends that the Insurance in Superannuation Working Group's Insurance in Superannuation Code of Practice be updated to reflect Recommendation 10.3.

Recommendation 10.6

10.82  The committee recommends that the Financial Services Council's Life Insurance Code of Practice include explicit commitments that:

Recommendation 10.7

10.101  The committee recommends that after consultation with relevant medical professionals independent of the life insurance industry and mental health advocacy groups, the Financial Services Council establish a mandatory and enforceable Code of Practice for its members, or a dedicated part of its existing Code of Practice, specifically in relation to mental health life insurance claims and related issues.

10.102  The committee further recommends that these consultations discuss requiring insurers to:

Recommendation 10.8

10.103  The committee recommends that consideration be given to allowing insurers to more actively promote and fund evidence-based best-practice preventative health measures targeted at promoting good mental health at a general level.

Recommendation 10.9

10.129  The committee recommends that the Financial Services Council and the Insurance in Superannuation Working Group consult with financial legal services and mental health advocacy groups to determine appropriate timeframes for claims decisions and that the Life Insurance Code of Practice and the Insurance in Superannuation Code of Practice be updated to reflect the outcome of such consultation.

Recommendation 10.10

10.130  The committee recommends that after consultation with relevant stakeholders, including medical professionals that are independent of the life insurance industry and mental health advocacy groups, the Financial Services Council and the Insurance in Superannuation Working Group mandate through the Life Insurance Code of Practice and the Insurance in Superannuation Code of Practice an upper limit on the number of medical assessments that can be requested of a policyholder and the specific circumstances in which this upper limit could be deviated from.

Recommendation 10.11

10.138  The committee recommends that the concentration of power in the Claims Management Industry, as well as the Independent Medical Examiner market be monitored by the Australian Competition and Consumer Commission to ensure appropriate quality assurance practices are in place and conflicts of interests are managed.

Recommendation 10.12

10.142  The committee recommends that the government consider establishing mechanisms to ensure the appropriate bodies are able to undertake random audits of both historical and future medical reports procured by independent medical examination companies, comparing the original reports as drafted by doctors with those used by life insurance companies as the basis for the decision.

Recommendation 10.13

10.183  The committee recommends that the Australian Government introduce legislation to facilitate the rationalisation of legacy products noting that such legislative change should include a no-disadvantage rule whereby:

Recommendation 10.14

10.190  The committee recommends that the Australian Government conduct a thorough inquiry or consultation process before it progresses any reforms relating to life insurers funding rehabilitation services, including impacts on private health insurance, or Medicare, and any conflicts of interest that may arise for an insurer vis-a-vis their customer and the most appropriate care.

Recommendation 10.15

10.193  The committee recommends that the Financial Services Council, with the Royal Australian College of General Practitioners and key stakeholders, explore issues around those with dementia claiming on life insurance. Following this, the committee recommends that together they prepare and implement protocols within the Code specifically addressing the treatment by life insurers of those with dementia.

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