Maurice Blackburn has flagged possible legal action if life insurers found to have breached the industry code “decide not to do the decent thing” by compensating affected clients.

The plaintiff law firm sounded the warning after an independent review it initiated found significant claims and handling breaches of the Life Insurance Code of Practice.

Nearly 45% of the alleged breaches reported by the plaintiff law firm in February 2018 found code subscribers did not comply with the conduct and practices guidelines.

The Life Code Compliance Committee (LCCC), in charge of monitoring subscriber compliance, launched the review after the law firm submitted that there were 701 alleged breaches of the code.

“Now that the LCCC has confirmed that the insurers did indeed unreasonably delay the processing of our clients’ claims, we believe that they should now pay these people interest,” Principal Josh Mennen told insuranceNEWS.com.au.

“For each month that these companies didn’t process and pay a claim, they profited from the investments they made with our clients’ money.

“If the insurers decide to not do the decent thing, then Maurice Blackburn will of course investigate our clients’ legal rights.”

The code is owned by the Financial Services Council (FSC) and came into effect in July 2017 with the aim of improving service standards across the under-fire industry.

It sets out a framework for principles of conduct, requiring insurers to be “open, fair and honest” in their dealings with consumers.

But the conduct and practices of the 11 code subscribers has left the committee alarmed.

“Of concern to the committee is that a substantial number of these were only identified as a result of the bulk referral, clearly indicating that many subscribers lacked robust frameworks for monitoring compliance with…the code,” the committee says.

“In addition, in most cases subscribers had not reviewed or improved their frameworks until the committee undertook its review.”

The committee says most subscribers failed to respond to its request for more information in relation to the alleged breaches.

It was forced to write directly to the companies’ CEOs last August to provide the required information.

“Initial responsiveness to the committee’s enquiries was generally poor and remediation has not been proactive,” the committee says.

While the subscribers have started the necessary remedial works, the committee says “it has taken far too long and is largely only occurring as a result of the review rather than the subscribers’ desire to ensure they comply with the code”.

“Subscribers must take their code compliance far more seriously than they have to date. Compliance monitoring must be prioritised, ongoing and systematic.”

The FSC has responded to the review, saying the findings relate to cases in the early days of the code’s introduction in 2017 and that it “is silent on the positive changes” made by the life sector.

According to the FSC, the allegations investigated in the review “relate only to the timing of decisions, not the outcome of decisions”.

FSC data shows 92% of claims assessed are paid in the first instance, the council says.