The interim review of the Life Insurance Code of Practice sets out significant proposed changes to how Australian life insurers operate, with effects across product design, underwriting, claims, vulnerability frameworks, and governance, according to Mallesons partner Sarah Yu. She describes the report as an examination of insurers’ operating models rather than a technical redraft, and notes that it has implications not only for life insurers but also for fund managers and institutional investors with exposure to the sector.
Yu notes that the interim findings indicate higher expectations for mental health underwriting, claims handling, and support for vulnerable and First Nations customers, as well as increased scrutiny of group life through superannuation, legacy and funeral products, and distributor oversight. She has recommended that insurers begin gap analysis now, comparing current processes to the proposed code settings and identifying where changes could materially affect business models or superannuation relationships ahead of the consultation deadline of May 8, 2026.
Independent reviewer Peter Kell released the Interim Report on April 10, 2026, following the first phase of the Life Insurance Code of Practice review. The report places particular emphasis on mental health, reflecting higher claim volumes and ongoing discussion about affordability, sustainability, and the treatment of customers with mental health conditions. The review proposes that the industry’s mental health commitment be moved from an appendix into the main body of the code. It also recommends development of a standalone, plain‑language “Consumer Guide to Life Insurance and Mental Health” explaining how mental health is considered in underwriting and claims.
When cover is declined or non‑standard terms are applied for mental health, insurers would be required to provide written reasons, an opportunity for the customer to correct information and a plain‑English summary of the actuarial or statistical material that informed the decision. For product design, the report raises the unresolved question of whether blanket mental health exclusions in standard form policies should be allowed, given that the current code is interpreted as restricting such exclusions while the Disability Discrimination Act 1992 (Cth) permits some product limitations. The Council of Australian Life Insurers (CALI) has argued that if mental health risk can only be managed through individual underwriting, the existing code position may not be sustainable, and the reviewer is seeking further input.
The Interim Report recommends changing how the code addresses vulnerability. Rather than relying mainly on customers to identify themselves as vulnerable, it proposes alignment with Australian Standard AS 22458:2025 and a risk‑factor approach that recognises any policyholder may experience vulnerability at different points in time. The code would outline a wider range of indicators, including health status, abilities, access and skills, life events, and external conditions. The report also proposes requiring trauma‑informed policies and training, clearer explanations of available support, and recording relevant personal information with consent where this assists in providing appropriate assistance.
On family and domestic violence, the reviewer proposes that insurers be required to prioritise the safety of affected customers and their families and to follow CALI’s Best Practice Guidance. This includes maintaining a public family violence policy, applying privacy and confidentiality protections, and incorporating Safety by Design principles into new products and processes. For First Nations customers, recommendations include prominent website content for Aboriginal and Torres Strait Islander peoples, an option for customers to identify as Aboriginal and/or Torres Strait Islander (with consent to retain that information), broader cultural competency training for staff who deal with First Nations customers, and processes to address issues such as gratuitous concurrence and language barriers.
Claims handling remains a central theme because of its link to complaint levels and customer outcomes. The Interim Report does not propose changing the main decision timeframes of two months for income‑related claims and six months for lump sum claims, but it recommends tightening related obligations. Proposed measures include reducing the initial information‑gathering period from 10 business days to five business days, requiring that claim decisions be provided in writing within the existing timeframes, shortening reassessment periods for reopened claims, and specifying more detailed content for regular claim updates. All claimants, not only those with income protection claims, would have a human primary contact.
Insurers would be required to explain why particular information is requested, provide written explanations and an outline of the path to resolution where claims are significantly delayed, and operate under a clearer definition of “Circumstances Beyond our Control.” The report also recommends stronger expectations around follow‑up with third parties and more detailed reporting to the Life Code Compliance Committee (Life CCC) on the use of that term. For group insurance through superannuation, the Interim Report notes forthcoming government reforms that will introduce mandatory service standards for large Australian Prudential Regulation Authority (APRA)‑regulated funds, including for insurance claims. Kell recommends revisiting code provisions related to superannuation claims once those standards are in place to address how responsibilities are allocated between trustees and insurers. The report further proposes moving the code’s medical definitions into a separate Medical Definitions Guide overseen by an expert panel. The existing three‑year review requirement would continue, and the panel would also conduct an early review of current definitions. Insurers would be expected to identify which definition was used in a claim decision and explain that choice.
Beyond claims, the Interim Report addresses sales and customer communications. It recommends updating the code to reflect new premium labels for retail business introduced from Jan. 1, 2025, and requiring insurers to give upfront explanations of premium types, expected premium movements over time, the effect of discount cessation, and indicative premium pathways. The report proposes stronger rules on unacceptable sales practices, clearer cancellation processes, and additional protections for funeral insurance, including prohibiting sales to consumers under 50 and to customers who already hold funeral cover.
In complaints handling, the reviewer finds broad alignment between the code and Australian Securities and Investments Commission (ASIC) Regulatory Guide 271 on internal dispute resolution but recommends inserting an express requirement for subscribers to comply with RG 271 and strengthening references to the Australian Financial Complaints Authority (AFCA). Complaints would be more explicitly treated as a source of feedback for continuous improvement. On governance and enforceability, the Interim Report proposes expanding the Life CCC’s sanction and reporting tools, widening its access to breach information, removing current limits on Community Benefit Payments, and allowing the committee to name insurers in inquiries and reports without linking specific data to particular entities. The report does not recommend that ASIC directly enforce Code provisions but supports incorporating the code into new customer contracts and indicates that the review is being conducted in a way that could support a future ASIC approval application.
CALI has publicly welcomed the release of the Interim Report. “This independent review is an important part of our industry’s promise and commitment to the people we protect every day. It provides a robust, independent process to hear a broad range of views about how we can continue to ensure our industry lives up to the expectations of the community. It is critical that the Life Code reflects the needs of our customers, keeps pace with changing laws and regulations, and is practical and easy to understand,” CEO Christine Cupitt said.
From a commercial perspective, Yu points to potential increases in compliance and remediation spending, adjustments to product design, and closer scrutiny of mental health underwriting, vulnerability frameworks, superannuation interfaces, use of “Circumstances Beyond our Control,” and code breach reporting. She suggests that life insurers, superannuation trustees, and investors review current mental health terms, underwriting tools, refusal and alternative‑terms letters, and end‑to‑end claims, hardship and complaints processes against the proposed standards, and consider making submissions before May 8, 2026, where the recommendations could materially affect their operating models. A final report with recommendations for changes to the Life Insurance Code of Practice is due to be delivered to CALI by June 30, 2026.
