Insurers should have requested information earlier in 63% of total and permanent disability (TPD) claims reviewed by the Life Code Compliance Committee (Life CCC), raising fresh questions about claims handling standards in a sector already under regulatory pressure.
The committee’s inquiry, Clearer communication, timelier decisions: Improving claims handling in life insurance, examined longer-running TPD and income protection claims across six life insurers using data from the 2023-24 financial year. It focused on claims where insurers said circumstances beyond their control had affected decision timeframes.
Of the 67 TPD claims reviewed, insurers acknowledged they should have sought information earlier in 42 cases. Among the 116 income protection claims examined, the figure was 45.
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The findings matter for brokers and advisers who place clients into life insurance products because claims performance is now the top criterion brokers use when evaluating insurers, according to the Insurance Business Australia Brokers on Insurers 2026 report. Claims turnaround edged past overall service for the first time, while commission structure ranked last for the third consecutive year.
Data from the Australian Prudential Regulation Authority (APRA) for the 12 months to December 2025 shows TPD claims already take the longest to finalise of any life insurance product, averaging 3.8 months. Only 50% of TPD claims were finalised within two months, and 4% took longer than 12 months. The acceptance rate for individually advised TPD policies sat at 82%, compared with 97% for death cover.
Dispute rates underscore the friction. Income protection generated 315 disputes per 100,000 lives insured for individually advised policies, the highest of any life insurance product reported by APRA.
The National Insurance Brokers Association (NIBA) has also signalled that claims handling is a growing priority for the profession. NIBA launched its first dedicated Claims Committee in August 2026 to identify systemic claims issues and support broker engagement with insurers and regulators on reform.
Against that backdrop, the committee’s finding that insurers’ own processes contributed to delays in a majority of TPD cases reviewed adds weight to concerns about whether the current system is working fast enough.
The inquiry sits within a broader pattern. Life insurers reported 10,697 breaches of the Life Insurance Code of Practice in 2025-26, affecting 27,289 customers, according to the committee’s annual report. Claims handling made up 69% of the 111 allegations the committee finalised.
One insurer was sanctioned after recording 358 claims handling breaches. Some of that insurer’s customers waited more than eight months for outcomes, and the insurer paid over $160,000 in interest to more than 100 eligible customers.
Jan McClelland AM, chair of the Life Code Compliance Committee, said the inquiry offered practical lessons for the industry. “Some claims take longer for legitimate reasons outside an insurer’s control. What insurers can do is ensure their own processes keep claims moving and give customers clear information and support while they wait,” McClelland said.
She added: “For someone dealing with illness, injury or loss of income, avoiding unnecessary delays and understanding what happens next can make an important difference.”
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The Australian Securities and Investments Commission (ASIC) named insurance complaints and claims handling an enforcement priority for 2026 and published a supervisory letter to the life insurance sector in September 2026 setting out its expectations.
The Life Insurance Code of Practice is also under review. Peter Kell, former deputy chair of ASIC and independent reviewer of the Code, delivered 85 recommendations to the Council of Australian Life Insurers (CALI), nine of which addressed decision timeframes and how insurers define “circumstances beyond our control.” CALI committed to dozens of changes but deferred its response on claims handling into 2027.
Under the current Code, insurers have two months to make a decision on income-related claims and six months for lump sum claims. The proposed changes would halve the initial information-gathering period from 10 business days to five.
McClelland said identifying needed information early, coordinating requests, and giving claims managers access to technical support could reduce delays. “If a late request has delayed a decision or payment, insurers should review whether the customer was disadvantaged and whether the insurer needs to provide remediation,” she said.
Some of the six insurers reviewed have already made changes, including earlier information requests, improved correspondence templates, and closer monitoring of longer claims. Some have provided remediation and reported breaches.
The committee said it would monitor whether those changes hold and expects all life insurers to use the findings to review their own processes.
