The revamped Life Code of Practice will come into force on July 1, providing more than 50 new customer protection measures including a financial penalty of up to $100,000 for significant breaches, support for policyholders experiencing domestic violence and banning blanket mental health exclusions. 

The Financial Services Council (FSC), which owns the Code, has also prepared a fact sheet to help consumers understand the difference between stepped and level premiums and a consumer guide to life insurance law. 

FSC CEO Blake Briggs says the new Code represents a “significant milestone” in the life insurance industry. 

“The new Life Code will come into effect in less than a month and will encompass all aspects of the customer’s journey, from the design and sale of products to the claims process,” Mr Briggs said. 

“By setting higher standards than what the law mandates, the new Code will increase trust, transparency, and fairness in the life insurance sector.” 

Signatories to the Code were given a one-year transition period to prepare, which ends on June 30. 

Mr Briggs says the new consumer-focused materials – the premium fact sheet and guide to life insurance law – have been prepared with the support of Code subscribers and in consultation with the recently established Council of Australian Life Insurers (CALI). 

“The FSC has continued to maintain the Life Code to deliver on our commitments to regulators and consumer advocates,” Mr Briggs told insuranceNEWS.com.au. 

He says the FSC is “continuing to liaise with industry and CALI on what the most suitable arrangements are for the ownership and maintenance of the Life Code in the future”. 

“Our joint priority is ensuring the robustness and continuity of the consumer protection framework for life insurance customers,” he said. 

insuranceNEWS.com.au understands CALI and the FSC are working to transition governance of the Code to CALI by September 30. 

The revamped Code marks the first time that changes have been made since the FSC introduced it in 2016. 

In relation to mental health the new Code says new products will not incorporate a blanket exclusion in the general terms and conditions of the standard form contract. 

If a consumer has a diagnosed mental health condition or family medical history the Code says subscribers will not decline to provide insurance before the person has had the opportunity to provide information about the history, severity or type of condition. 

The new Code will also maintain the moratorium for genetic tests. 

“Genetic testing has the potential to play an important role in informing people about their health and enabling them to manage their health risks through preventative actions and personalised medicine,” the Code says. 

“It is important that public concerns about the use of genetic test results in life insurance do not dissuade people from taking genetic tests or taking part in genetic research. 

“With effect from 1 July 2023, this moratorium… applies indefinitely until the FSC gives further notice following a review.” 

The fact sheet on stepped and level premiums comes after the Australian Financial Complaints Authority (AFCA) said last year consumers are confused by the terms. 

According to AFCA the term “level” premium is confusing for life policyholders as they think it means the premiums they pay will not change. 

The fact sheet says with stepped and level premiums the cost can increase periodically. 

With level premiums cost increases associated with getting older are spread out over a number of years. 

“This means the cost starts out higher than stepped premiums, but depending on how long you hold your policy, the cost may be lower at some point in the future,” the fact sheet says. 

Click here for the new Code and consumer support materials.