The compliance committee monitoring the Life Insurance Code of Practice has warned that some companies lack proper risk and compliance frameworks.

The Australian Financial Complaints Authority, which oversees the committee, says the quality of life insurers’ risk processes is inconsistent and in some cases poor. As a result, they are not accurately capturing isolated breaches.

In the year to last June 30, there were nearly 8000 isolated breaches of the code, affecting a single customer each; 60% of isolated breaches related to claims.

More than 1.6 million consumers were affected by life insurers failing to make legacy policies and IT systems compliant with the code of practice by the time they adopted it.

“Given that subscribers had nine months to transition to the code, the number of events and consumers potentially impacted by transition-related breaches was disappointing,” the committee says in a report.

There were 15,106 complaints in the year. About 48% of consumer complaints were about insurance policies, while 20% were about claims. Cover bought through direct or retail channels represented a disproportionately large number of complaints, the report says.

About 46% of all complaints were about cover sourced from retail distribution channels, even though these channels made up only 11% of cover types inforce.

Consumers may have a poorer understanding of these policies, the report says.

Direct cover was responsible for 39% of complaints, despite generating only 8% of all policies inforce.

There were 37.6 million cover types inforce at June 30 last year. Death cover made up 41% and total and permanent disability 33%. Group distribution accounted for 81% of cover held.

“We don’t shy away from the fact there is more to be done,” Financial Services Council Senior Policy Manager Nick Kirwan said. “The [committee’s] inaugural report provides an important baseline to measure the industry against in future years, and insights into areas where the industry should focus its attention.”

He says life insurers made decisions on 89% of all income-related claims and 92% of lump sum claims within the required timeframes.