The Life CCC's inquiry revealed a split in industry practices. Some insurers are meeting the code's requirements by assessing each applicant's unique situation. However, a significant number of insurers default to exclusions or outright denials when mental health conditions are disclosed. This approach may restrict access to life insurance and reinforce stigma by treating all mental health disclosures similarly.
Jan McClelland, chair of the Life CCC, emphasised that the code requires insurers to evaluate each applicant on an individual basis. She stated, "Mental health conditions touch millions of Australians, and the code is clear: insurers must assess each customer fairly, based on their own circumstances." McClelland added that adhering to the code is mandatory, and insurers relying on broad exclusions need to make changes to align with these standards.
The committee also identified a lack of robust data on how mental health disclosures are assessed and the outcomes of these cases. This gap makes it difficult for insurers to evaluate their practices or identify areas for improvement. McClelland highlighted the importance of robust data, noting that accurate information is essential for developing a genuine understanding of mental health-related cases.
Balancing fairness with business sustainability is crucial, as mental health conditions are now a leading cause of life insurance claims. Recent data from the Council of Australian Life Insurers (CALI) shows that mental health now accounts for nearly one-third of all total and permanent disability (TPD) claims paid. In 2024, life insurers in Australia paid out more than $2.2 billion in retail claims related to mental health, nearly double the figure from five years ago.
The Life CCC intends to continue monitoring insurer compliance and may take further action if non-compliance persists. The committee plans to seek updates from insurers on improvements to training, underwriting, and data collection in the coming months. McClelland stated, "Our role is to ensure the industry meets the standards it has set for itself through the code. That means decisions that reflect evidence and individual circumstances, and better outcomes for customers."
For consumers, this review underscores the importance of transparency and fairness in the life insurance application process. Individuals with mental health histories should be aware of their rights and the industry's obligations under the Life Insurance Code of Practice. Seeking professional advice can help navigate the complexities of obtaining appropriate coverage.
