Life Insurers Under Scrutiny: The Consequences of Failing to Meet Obligations
Life Insurers Under Scrutiny: The Consequences of Failing to Meet Obligations
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
The regulation of insurance claims handling and settling as a financial service under the Corporations Act 2001 in Australia has far-reaching implications for both consumers and life insurers.
As per the Australian Securities and Investments Commission (ASIC), the handling of claims must be done efficiently, honestly, and fairly, and any breaches in these obligations can result in severe consequences for life insurers.
For consumers, this regulation ensures that they receive accurate and fair payments in case of a claim. The miscalculation of policy benefits can lead to significant financial losses for the policyholder, and this regulation ensures that life insurers are held accountable for their actions. Additionally, the ASIC's call for life insurers to review their systems and controls for claims calculations and payments gives consumers peace of mind that the insurance company they trust is adhering to the highest standards of practice.
Life insurers, on the other hand, must take the necessary steps to ensure that their claims calculation and payment processes are accurate and in line with the regulations set forth by ASIC. This may involve examining and rectifying the root causes of miscalculations, including complex product rules, inadequate staff training, outdated technology systems, ineffective controls, and lack of monitoring. The seven life insurers who have been reported for breaches have taken steps to implement system fixes and customer remediation programs, but all life insurers must be proactive in ensuring their processes are in line with the regulations.
Here are some examples to illustrate the potential consequences of miscalculations and the steps that could be taken to resolve the issue:
Mrs. Smith had taken out a life insurance policy on her husband's life with a prominent insurer. Upon filing a claim following her husband's passing, she was shocked to learn that her policy benefits had been miscalculated, leading to a significant underpayment of her claim. She reached out to the insurance company and found out that the error was due to an outdated system that failed to apply the correct consumer price indexation to her policy benefits. Mrs. Smith was able to resolve the issue by working with the life insurer to complete a customer remediation program.
Mr. Johnson had an income protection policy with a different life insurer. Upon filing a claim, he learned that his policy benefits had been miscalculated, leading to an overpayment of his claim. The error was due to inadequate staff training on the manual processes for assessing and calculating income protection benefits. Mr. Johnson was able to resolve the issue by working with the life insurer to help identify and rectify the training issues and ensure accurate calculation of benefits going forward.
In both of these examples, the customers were able to resolve the issue by working with their life insurers and taking advantage of the customer remediation programs offered by the insurers. This highlights the importance of being aware of the terms of your insurance policy and of the steps that can be taken to resolve any issues that may arise. It's also essential to choose a reputable and trustworthy insurance company that adheres to the regulations set forth by ASIC and takes the necessary steps to ensure accurate and fair claims calculation and payment.
So, the regulation of insurance claims handling and settling as a financial service under the Corporations Act 2001 serves to protect the rights and interests of Australian consumers while holding life insurers accountable for their actions. It is essential for both consumers and life insurers to be aware of these obligations and take the necessary steps to ensure accurate and fair claims calculation and payment. Failing to meet these obligations can result in severe consequences, including financial penalties, legal action, and reputational damage.
Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.
New Zealand’s life and health insurance market is facing a quiet but important shift: younger adults are not necessarily rejecting protection, but many are postponing the life events that usually trigger it. Recent industry reporting, drawing on Deloitte and Financial Services Council research, shows Gen Z and millennial New Zealanders are delaying major decisions such as buying a home, starting a family, changing careers or launching a business because of financial pressure. - read more
New Zealand’s younger workers are reshaping the traditional path into insurance. Fresh industry reporting, drawing on Deloitte’s 2026 Gen Z and Millennial Survey and Financial Services Council research, points to a clear shift: many Gen Z and millennial New Zealanders are delaying major life decisions because of financial pressure. Home ownership, starting a family and career changes have long been moments when people reassess life, mortgage and income protection cover. - read more
New Zealand’s financial advice sector is heading into a more targeted year of scrutiny after the Financial Markets Authority’s latest conduct priorities highlighted fraud, adviser commissions and complaints handling as areas of concern for 2026/27. For households arranging life, trauma, income protection or health-related cover, the message is practical: the quality of advice, disclosure and record keeping matters just as much as the premium on the page. - read more
Victoria has moved another step in its building reform program, with the Building and Plumbing Commission now operating with stronger consumer protection powers and a developer bond scheme scheduled for apartment buildings from 1 July 2027. For strata communities, the announcement is not simply a construction law update. It is a reminder that building quality, defect management and insurance planning are becoming increasingly connected. - read more
A recent Australian Financial Complaints Authority decision has delivered a timely reminder for small operators: insurance protection depends on the details being right before something goes wrong. The dispute involved a food delivery business that suffered theft and damage at a site that was not listed on its insurance schedule. - read more
The digital age has fundamentally transformed how we approach almost every aspect of our lives, including the way we shop for life insurance in Australia. Gone are the days when one had to schedule meetings with insurance agents or flip through pamphlets to understand life insurance policies. Today, obtaining life insurance quotes online has become the norm, offering a hassle-free and incredibly accessible platform for individuals to safeguard their financial future. - read more
Life insurance is an essential safety net for families, providing financial security when it's needed the most. As your family grows, the importance of having a well-structured life insurance policy becomes even more critical. In the busy lives we lead today, it’s easy to overlook this crucial aspect of financial planning. However, ensuring your coverage meets your family's evolving needs is vital. - read more
Life insurance is a fundamental component of a robust financial plan, yet its significance is often underestimated. It serves as a safety net, ensuring that your loved ones are financially secure in the event of your absence. Understanding life insurance is the first step towards safeguarding your family’s future. - read more
Life insurance can seem complex at first, but understanding the basics can help demystify this important financial product. At its core, life insurance is a contract between you and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon your passing, in exchange for premium payments. - read more
The horizon of the insurance industry has undergone a transformative shift with the advent of digital technology. With a few clicks, consumers can navigate the once-complex world of insurance policies from the comfort of their home. The digital landscape for insurance services offers unprecedented access to information, comparisons, and instant communication, fostering a more empowered insurance client. - read more
Start Here !
Apply now for your free Insurance assessment and price comparisons!
Knowledgebase
Reinsurance: Insurance that an insurance company purchases from another insurance company to mitigate risk.
No comments yet. Be the first to share your thoughts.