Australia's two big insurance codes are heading in opposite directions on the question that probably matters most to their critics: Whether the promises insurers make should be legally binding.
The final report of the independent review of the Life Insurance Code of Practice (Life Code), released last week by Peter Kell, recommended the Life Code eventually become contractually enforceable. However, while noting the “strong support” for this option, Kell also pushed this work down the agenda, calling for it to form part of the terms of reference for the next Code review in five years. He recommended that the Council of Australian Life Insurers (CALI) "should not seek designation of any code provision as an ASIC enforceable code provision[s]."
That puts life insurance on a much slower track than general insurance. The Insurance Council of Australia (ICA) has made contractual enforceability the centrepiece of its redrafted General Insurance Code of Practice (the Code), currently out for public consultation until July 21.
Insurance Business reached out to CALI with questions about its response to the independent review. The life insurers’ peak body responded saying the industry is considering the recommendations with members and that CALI will publicly release an industry response to the final report by September 30.
"There was strong support for contractual enforceability from a range of stakeholders," he wrote, noting it would align life insurance with "the current or proposed approach in other parts of the financial services sector including banking and general insurance." Supporters included the Australian Financial Complaints Authority (AFCA).
But insurers pushed back. CALI's submission raised the guaranteed renewable nature of life insurance products - a complexity Kell accepted is "not faced in banking or general insurance" - along with concerns that enforceability would produce a more prescriptive, legalistic Code and that the Life Code lacks the maturity of other financial services codes.
The timing was the decider. With significant further work recommended on mental health coverage and mandatory superannuation service standards looming over group insurance, Kell concluded those reforms must come first. "Recognising that this will take time, this objective should be included as part of the terms of reference for the next Code review," he wrote, though preparatory work could begin earlier.
The contrast with general insurance is stark. ICA CEO Andrew Hall has championed enforceability.
There are some stakeholders that support CALI’s position. Jessica Thurtell (pictured), partner at law firm Clyde & Co told IB that the push for enforceability misunderstands what codes are for.
"Making it enforceable would likely require a full scale redraft to make it read more like legislation," she said.
That, argued Thurtell, would strip the Life Code of its consumer-facing plain-English value. Insurers, she noted, are already heavily regulated, and Code breaches are already reviewed by the Life Code Compliance Committee.
"The Code doesn't need to be another enforceable regulation, that was not its purpose," she said. Thurtell stressed this is her personal view, not one she attributes to other life insurance law specialists or industry stakeholders.
Her view is at odds with - apart from AFCA - other legal firms and the Australian Lawyers Alliance (ALA), which represents lawyers acting predominantly for plaintiffs and claimants.
The Law Council of Australia, the peak national body representing the legal profession, expressed a range of opinions on this question in its submission.
Enforceability is only one strand of Kell's 85 recommendations. Mental health is the report's dominant theme, with proposals to prohibit total exclusions of mental health cover while permitting data-supported limitations, reviewed at least every three years. Other recommendations cover support for customers experiencing vulnerability, engagement with First Nations customers and claims handling timeframes - including informing claimants of decisions within 15 business days.
Kell's recommendations carry no legal force of their own. The Life Code is a voluntary industry code owned by CALI and it is CALI, not government, that will decide which of the 85 recommendations are adopted when it delivers its initial response at the end of September. Any accepted changes would then be written into a redrafted Code, with reports suggesting implementation towards the end of 2027.
One main government-driven change in the life sector will arrive through a separate track: mandatory service standards for large APRA-regulated superannuation funds, which will impose enforceable obligations on insurance claims handling in group life regardless of what CALI does with the Code.
However that leaves a big practical question with CALI's September response: Whether, five years from now, life insurance follows general insurance and gives its code teeth.
