The Financial Services Council released a draft of the second version of its Life Insurance Code of Practice this morning with changes geared at addressing concerns in mental health and welfare.
Foremost among the proposed changes geared at mental health is a shift towards relying on reports from general practitioners instead of clinical notes, which limits the amount of information the insurer receives to what is in the report, instead of disclosing patients’ extended medical history.
The FSC stated that “by favouring GP [general practitioners’] reports over clinical notes, we hope to give people more confidence to get the treatment they need, even before they apply for life insurance”.
The draft’s author, FSC senior policy manager Nick Kerwin, said the change was developed after consultation with the Royal Australian College of General Practitioners, which was “very keen to move away from clinical notes and [begin] working on reports” so that more consumers would be encouraged to get treatment.
“We’re hoping that even before the consultation process starts, that will give people the confidence to go to the doctor and get the treatment they need, so that when they come to take out insurance at some future time, those notes will be between the doctor and themselves,” Kerwin explained. “We recognise there are things that are in those clinical notes that are not intended for insurers.”
The FSC also proposed that insurers not be able to check disclosures at the point of claim without having reasonable grounds for doing so. Kerwin explained that this was an amendment “to fix a fault in the law, which came out in the [Hayne] royal commission”.
“Of course, insurers are fully entitled to investigate any condition a person is claiming for and its full history, up to the point of claim,” Kerwin continued. “But there should be no checking of other medical information – for example, disclosures – without reasonable grounds for doing so.”
Other changes include a directive to make it clearer for consumers what they need to disclose, with questions that are “in plain language where possible, are easy to understand and are not ambiguous”, Kerwin noted.
He said the mental health community had mentioned that complicated or unclear questions were an area that needed addressing. He used the question, “Have you had an episode of mental illness?” as an example of a query that obfuscates the underwriting process.
“What does that mean?” he asked. “I have no idea what that means. If you want to know if they had a week off work, ask that. If you want to know if they saw a doctor, ask that. That’s what the new code requires; it says let’s be clear.”
Coercion and pressure selling are also addressed in the proposed code of practice, with limits on who can be sold life-insurance products, when providers can sell them, and how to identify someone who is “vulnerable” to such selling, which includes someone with mental health issues.
No silver bullet
Kerwin explained that while the changes were aimed at alleviating some of the pain points for people suffering from mental health issues, they were also aimed at making things better for consumers as a whole.
He admitted that fitting mental health into the insurance landscape still posed many challenges for the industry.
“We haven’t found a silver bullet,” Kerwin said. “I guess if we had found a silver bullet – given the nature of the challenge to mental health globally – we should have been putting this up for a Nobel Peace prize rather than a review of the code.”
The proposed revised code of practice builds on the original 2017 code and is designed to lift standards for product design, sales, underwriting, customer service, complaints and claims handling. FSC chief executive Sally Loane said today that the new version would be “comprehensively different” from the original.
“Why are we strengthening the code so soon?” Loane asked. “Because we’re listening and acting on the concerns and issues raised by [ASIC], the Parliamentary Joint Committee inquiry and, of course, the royal commission hearings.”
Loane said the findings from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, in particular, made rebuilding the standing of the life insurance sector a “difficult but absolutely achievable task”.
FSC members currently bound by the code include most major life insurers, such as TAL Life, Zurich, AIA Australia, Allianz, AMP Life, MLC and MetLife.
The FSC website states that compliance with the code is independently monitored by a group called the life code compliance committee, though Kerwin noted that the FSC intended to get the new code registered with ASIC.