Brought to you by:

New compliance data sparks call for ‘root and branch’ review

Facebook Twitter LinkedIn Google

A rise in code breaches blamed on staff actions has cast doubt over life insurers’ assertions that they have adequate training frameworks in place for employees, according to the Life Code Compliance Committee (LCCC).

The LCCC says life insurers should carry out a “root and branch” review of their internal processes after its annual code compliance report shows 93% of isolated breaches for the 12 months to June 30 last year were attributed to people-related issues. This is up from 88% in the year-earlier corresponding period.

Human error was the biggest reason cited, accounting for 1560 of 4975 isolated breaches. An isolated breach is defined as a single breach resulting from a specific cause at a point in time and impacting one customer.

Failure to follow process and procedure is the second-biggest culprit (1462), followed by skills and training (989), resourcing (375) and training on code compliance process (246), the LCCC’s Annual Data and Compliance Report 2019/20 found.

“Given subscribers’ assertions that they have frameworks in place to ensure the competency of their underwriters and claims staff, the Committee is at a loss to understand why people-related issues continue to be the cause of so many breaches,” Chairman Anne Brown said.

“Are subscribers’ competency frameworks not sufficiently robust? Or are subscribers simply nominating ‘human error’ or ‘processes and procedures not being followed’ as a default option instead of investigating the root cause of the breach?

“Either way, if subscribers are serious about preventing breaches, we would urge them to look beyond who or what caused the breach to find out why the breach occurred.”

She says the committee is sceptical of subscribers’ declarations that they have the necessary processes and procedures in place to achieve code compliance, including processes around training, monitoring and breach correction.

“We urge subscribers to conduct a root and branch analysis of why their staff continue to make mistakes that lead to code breaches, including a thorough review of all code competency training and monitoring activities,” the report says.

The report’s findings this year are based on data from 25 code subscribers including 16 life insurance issuers and five reinsurers.

Other key findings from the report are:

  • Covers in force fell by 20% in 2019/20 following the introduction of new laws to protect superannuation funds and control the sale of consumer credit insurance and funeral cover
  • Most claims decisions were made within the timeframes set out in the code. Where Unexpected Circumstances delayed claims decisions, most subscribers were able to explain why
  • While overall complaint numbers were similar to the previous reporting period, complaints about claims rose 40%, with most of these relating to the time it took subscribers to assess customers’ claims
  • Breach events relating to claims, policy changes and cancellation rights impacted the most customers

Click here to access the report.