The Australian Securities and Investments Commission’s (ASIC) six-month review of the life insurance industry has found more than 90% of claims are paid.

But the regulator has expressed concerns about trauma and total and permanent disability (TPD) claims.

The average rate of declined claims for TPD cover was 16%, with trauma on 14%. This compares with 4% for life and 7% for income protection claims.

Rejected claims rates were lowest in retail distribution channels (7%), while direct sales recorded 12% and group life 8%.

ASIC will now undertake targeted surveillance of particular insurers with substantially higher than average decline rates.

It has not named these insurers. All major companies were part of the review.

ASIC says it wants public reporting of claims data and outcomes, including claims-handling timeframes and dispute levels across all policy types. It is expected this data will be made available on an industry and individual-insurer basis.

The regulator will undertake targeted surveillance to examine why some insurers have high numbers of disputes.

It says two insurers were found to have a higher number of disputes compared with their claims settlement records. It does not name them.

The review found the amount of evidence required to support claims often leads to disputes, with consumers believing insurers are stalling on payouts.

ASIC accepts fraud management is acceptable, but it wants insurers to justify their file selection and methods on a case-by-case basis.

It wants the industry to develop consistent standards for claims timeframes, which should be communicated to policyholders.

ASIC wants insurance claims handling covered in the Corporations Act. Currently it is explicitly exempted from the financial services conduct provisions.

It has recommended the Federal Government remove this exemption and introduce more significant penalties for misconduct.