Claims-related breaches of the life industry’s code of practice recorded the biggest increase by category in 2022-23, up 18% to 9149, an annual compliance report shows.

Overall, the number of code breaches rose 9% to 12,314, the third straight year of increases. But the number of customers affected by non-compliance fell for the second successive year, by 47% to 106,266.

The Life Insurance Code Compliance Committee report, released today, covers July 1 2022 to June 30 last year, and is based on data provided by 22 insurers that subscribed to the code.

“Breaches related to claims handling obligations featured prominently in the increase,” committee Chair Jan McClelland said in the report.

“Failing to address claims promptly not only breaches code obligations but can also cause unnecessary stress and frustration for customers, eroding confidence in the industry. Meeting time frames for claims handling and communication must be a priority focus for insurers.”

The committee says it expects claims-related breaches to decline because the updated code, which took effect on July 1 last year, extends the time frame for communicating claims decisions from 10 business days to 15.

“We view this change as disappointing because we consider 10 business days to be sufficient time to communicate a decision. As a result of the extended time frame, we anticipate fewer breaches in future years,” the report said.

“We are monitoring insurers’ compliance with the new time frame closely and will act when we observe non-compliance. We know that many insurers regularly complied with the requirement to communicate the decision within 10 business days and, despite the change in the requirement, we encourage them to continue to do so.”

The report says the claims process is critical for customers, and insurers must get all aspects of claims-handling right, from communication and assessment to decision-making and support mechanisms for policyholders.

In 2022-23, failure to communicate a claims decision within 10 days increased 38%; failure to inform claimants about the progress of their claim at least every 20 business days and to respond to requests within 10 business days rose 36%; and failure to explain the claim process to a customer within 10 business days of the insurer being notified of the claim was up 21%.

All these breaches fell under the code’s Chapter 8: When You Make a Claim.

“As Chapter 8 also had the most breaches in the 2021-22 reporting period, we are concerned that some insurers continue to have difficulty complying with these obligations,” the report said.

“We acknowledge that the claims process can be complex and brings a heightened risk for breaches, and we recognise that many insurers are working hard to minimise errors in this area.

“However, the heightened risk of breaches emphasises the need for good systems and processes to support staff, protect customers and mitigate risks.”

Click here for the report.