Australia’s life insurance industry has released its formal response to an independent review of the Life Insurance Code of Practice, committing to dozens of changes while deferring four of the most contested areas – mental health, claims handling, First Nations access, and funeral insurance – to separate consultation processes running into 2027.
The Council of Australian Life Insurers (CALI) published its response to the 85 recommendations made by reviewer Peter Kell, a former deputy chair of both the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC), and a former chief executive of consumer group CHOICE.
Consumer groups, responding the same day, welcomed the package but flagged the deferrals as a test the industry still has to pass.
CALI has supported the majority of recommendations outright. Among the confirmed changes:
Four recommendations CALI will not pursue have also been confirmed, including expanding standard medical definitions beyond the existing three – a move CALI said lacked a sufficient evidence base.
On contractual enforceability – whether the Code binds insurers to customers as a matter of contract – CALI has supported only placing the question on the terms of reference for the next Code review, not acting on it now. That puts life insurance on a slower trajectory than general insurance, where contractual enforceability has already been adopted.
The review cycle itself will also shift: future reviews will occur every five years, rather than every three, once the new Code is implemented.
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The Financial Rights Legal Centre, responding on the same day, said the industry’s approach had been constructive but warned the deferred items still needed to deliver results.
“It is one thing to say you’ll consider a recommendation further and another to act positively on those recommendations – so the sector is on notice to ensure that each one of those recommendations result in positive responses actively addressing these issues,” said Drew MacRae, principal of policy development at the centre.
The Consumer Action Law Centre focused its concerns on funeral insurance, one of the four deferred workstreams. “To this day we have people contacting us for help – sometimes they hold multiple policies for no reason, many are facing hardship because of rising premiums, and many are paying premiums well over the value of the benefit their family will ever receive from the policy,” said Meg Dalling, assistant director at the centre.
CALI CEO Christine Cupitt acknowledged the work ahead. “A better Life Code does not mean a longer or more complex Life Code. The real test is the difference it makes for customers,” Cupitt said.
Nine of the 85 recommendations – covering decision timeframes, update obligations, delay explanations, and the definition of “Circumstances Beyond Our Control” – have been directed to the claims handling workstream rather than confirmed.
That matters because claims handling is where the compliance record is worst.
The Life Code Compliance Committee’s (Life CCC) 2023-24 Annual Industry Data and Compliance Report recorded nearly 14,700 Code breaches during the July 2023 to June 2024 period – a 19% increase year-on-year – affecting more than 210,000 consumers, a 98% jump in consumer impact. Of the 32 significant breaches recorded, up from 20 the prior year, three insurers accounted for 91% of all financial hardship and vulnerability-related breaches. Timely income protection payments and early claims communication were flagged as ongoing problem areas.
The Australian Securities and Investments Commission (ASIC) designated insurance complaints and claims handling as an enforcement priority for 2026, announced in November 2025.
For brokers advising on life, TPD, and income protection cover, the mental health changes carry the most direct commercial read-through.
The prohibition on blanket mental health exclusions in standard form contracts removes the most blunt product design tool but leaves a range of limitations in place. Caps, waiting periods, and individual underwriting terms remain permissible. Four further recommendations on mental health – including requirements for actuarial data to support any limitations and product review obligations – remain in the workstream pending H1 2027.
The underlying claims pressure driving this is well documented. CALI data published in July 2025, drawing on the CALI-KPMG Cause of Claims Results report, shows mental health is now the leading cause of TPD claims in Australia, accounting for nearly one in three claims paid. Insurers paid more than $2.2 billion in mental health-related retail claims in 2024 – almost double the figure from five years earlier. Mental ill-health drove one in five income protection claims, with payouts of $887 million that year. Among Australians in their 30s, the rate of TPD claims linked to mental health has risen 732% over the past decade.
The Code changes require insurers to produce plain-English guides to mental health and life insurance coverage, with lived-experience input.
Read next: The life event claims trigger Australian insurers have largely left unaddressed
Two structural signals in today’s response have longer-term implications.
First, CALI has confirmed it will not seek ASIC designation of Code provisions as enforceable regulatory requirements, keeping the Life Code within a self-regulatory framework for now. Second, contractual enforceability – which would give customers direct legal rights under the Code – has been deferred to the next review cycle, not this one.
Both decisions separate the Life Code’s current direction from the path taken by general insurance, where contractual enforceability is already embedded. Whether that gap closes at the next review will depend on how the H1 2027 workstreams conclude.
Cupitt said the process of drafting the updated Code would bring together the full range of voices.
“Throughout this process, it is essential customers remain at the centre of all our discussions, particularly those with lived experience,” she said.
The full recommendation-by-recommendation response is available at cali.org.au.
