The Life Code Compliance Committee has made seven recommendations for the industry to keep products up to speed with medical definitions that reflect current health trends and developments.

It made the proposals after finishing an “own motion” inquiry into the industry’s compliance with Section 3.2 of the Life Insurance Code of Practice, which relates to the obligation that medical definitions in on-sale policies be reviewed and updated, if necessary, at least every three years in consultation with medical specialists.

Section 3.2 also requires code subscribers to communicate updates to customers.

While the inquiry results reveal a 100% compliance rate from all 17 code subscribers, the committee says it has identified “some inconsistencies in practice and opportunities to improve aspects of the processes” by which compliance is achieved.

Timeliness of updating medical definitions and the communication of changes to customers are two areas where there is room for improvement, the committee says.

It says the seven recommendations, including expanding code coverage to off-sale products, will strengthen overall industry practice and benefit customers. Off-sale products refer to policies that are not currently offered to customers for purchase.

“The committee is reassured by these overall [own motion inquiry] results and about the ongoing ability of code subscribers to maintain this good practice in the future, given the evidence of robust processes and systems to monitor compliance with the code,” it says.

“Use of outdated medical definitions in life insurance policies have been the subject of negative media attention in the past and consumer awareness of this issue is high.

“It has never been more important for the industry to ensure that the medical definitions used in policies are fit for purpose and up to date with current medical developments.”

The Financial Services Council (FSC), which owns the code, says it will consider the seven recommendations made by the committee. It is currently in the process of preparing the next iteration of the code, which was introduced on July 1 2017.

“We are very pleased with this excellent level of compliance with reviewing and updating medical definitions, as required by the code,” FSC CEO Sally Loane said.

“As the [committee] states, in challenging and uncertain economic times, the code’s consumer protections are especially relevant, and ensuring that definitions are up to date and fit for purpose is a clear way to show that subscribers prioritise fair outcomes for their customers.

“The industry is working hard for its customers to make sure that policies are aligned to current medical practice in Australia.”

Click here for the committee’s own motion inquiry report.