Life insurers must overhaul legacy systems to better handle claims, the Australian Securities and Investments Commission (ASIC) says.

The call came as the regulator faced questions on its recent industry report at a House of Representatives Economics Committee meeting.

Committee Deputy Chairman Matt Thistlethwaite said the report identifies antiquated manual processes.

“It is concerning in this modern day and age that many of these files are not computerised,” he said. “I would have thought that can lead to bad outcomes for consumers.”

ASIC Deputy Chairman Peter Kell told the committee the regulator is also concerned about “the quality of some of the claims management systems. We are talking to insurers about how they are going to ensure those systems meet customer needs going forward.”

The regulator is pushing for the removal of the claims-handling exemption in the Corporations Act, arguing it will enable it to set timeframes for claims outcomes.

But it accepts timeframes can only be enforced if insurers have the technology to meet them.

A three-year review of insurer data systems included both computer and paper systems.

The regulator says it was difficult to review paper systems, because they had to be examined manually.

Mr Kell says another problem is that life insurance is a legacy product.

He says insurers and the regulator accept the need for a rationalisation of legacy products, but there is no timeframe for insurers to replace old systems. ASIC wants better information systems for claims outcomes and shorter timeframes for processing claims.