ASIC to improve life insurance industry for consumers
Life insurers will work with the government body, ASIC, to improve insurance claim success rates and provide a greater level of transparency for Australian consumers.
A recent investigation by ASIC into how life insurance is issued and handled in the country involved an examination of 15 insurers covering over 90% of the market.
Taking six months and working with APRA, it trawled through three years of data on the main policy types including term life cover and income protection.
“Life insurance is a vitally important financial product that helps support consumers and their families at times of significant stress,” said Deputy Chair of ASIC, Peter Kell.
This was evidenced by the data, where around 90% of life insurance claims were “paid in the first instance”, accounting for an estimated $8.2 billion dollars in net policy payments made in the year to June.
While ASIC found no evidence of insurer misconduct, the review highlighted “key issues of concern” when it came to the claim rates of particular policy types. For instance, the average rejection rate for trauma cover claims was 14%, and 16% where claimants with permanent disability cover had acquired a disabling medical condition.
“Not being able to successfully claim on a life insurance policy can be financially devastating for the consumer and/or their family, so it's important that the industry operates in a way that is fair and transparent,” Kell noted.
To address these concerns, ASIC has announced it will work with insurers and stakeholders to strengthen how claims get handled in future. The current consumer dispute resolution framework will also be improved.
Tips on choosing the right life insurance policy:
- Avoid doubling up on life insurance, as your superannuation provider may already have you covered. If so, make sure it’s the right kind of policy for you.
- Get recommendations from family and friends who can reflect on their first-hand experience with insurers.
- Dodge being ripped-off by comparing life insurance premiums against others’ in the market.
- Live in a dual income household? Check with your insurer whether a second applicant will score a discount.