The Life Insurance Code Compliance Committee (Life CCC) has found that some life insurers are still relying on blanket mental health exclusions or rigid underwriting practices, limiting coverage for Australians who disclose a mental health condition.
Releasing its report on its inquiry into insurers’ compliance with obligations in the Code of Practice that relate to mental health, the Life CCC said some insurers are meeting requirements by considering the individual circumstances of applicants, but others are not.
Life CCC Chair Jan McClelland said the findings show both the challenges and the opportunities for the industry.
“Mental health conditions touch millions of Australians, and the Code is clear: insurers must assess each customer fairly, based on their own circumstances,” Ms McClelland said.
“It is pleasing to see some insurers doing this. But others are falling short of their Code commitments. Compliance with the Code isn’t optional. And insurers that still use blanket exclusions must improve to meet the Code’s standards.”
Underwriting still defaults to exclusions
The inquiry found that insurers’ underwriting processes too often default to exclusions or denials when applicants disclose a mental health condition.
Of the underwriting guidelines reviewed by the Life CCC, almost all relied solely on exclusions rather than exploring alternative ways to manage risk, such as higher premiums, limits, or caps.
This approach can limit access to cover and may unintentionally reinforce stigma by treating all mental health disclosures in the same way.
It risks undermining trust and could create the perception that people with experience of a mental health condition will face challenges in securing life insurance.
Ms McClelland said these practices do not align with the spirit of the Code.
“Defaulting to exclusions means that customers are not being seen as individuals,” she said.
“Insurers need to show that they are genuinely weighing up each applicant’s circumstances, exploring alternatives, and using professional advice where appropriate. That is what the Code requires.”
Better data is essential
The inquiry found that insurers lack reliable data on their assessments of mental health disclosures and the outcomes of these cases.
Without this information, insurers cannot meaningfully evaluate their practices, identify systemic issues, and improve.
“Better data is critical to gaining meaningful insights. And these insights can inform practices that deliver better outcomes for customers, not just to meet compliance requirements,” Ms McClelland said.
“With the right data available, insurers can gain a clearer picture of how they’re dealing with mental health disclosures and make decisions that are more considered, transparent, and fair.”
Balancing fairness with sustainability
The Life CCC recognised that mental health conditions are now a leading driver of life insurance claims, placing pressure on sustainability and affordability across the sector.
Ms McClelland said these concerns were real but should not come at the expense of a fair underwriting assessment.
“We understand that not everyone who discloses a mental health condition, past or present, will be eligible for cover,” Ms McClelland said.
“However, it is crucial that insurers’ processes remain fair and considered. The increasing prevalence of mental health conditions only makes it more important for insurers to get underwriting right with an approach that considers individual circumstances properly.”
Ensuring accountability
As it continues to monitor this issue, the Life CCC will consider further action for insurers that fail to address non-compliance.
Over the coming months, it will seek updates from insurers on the steps they are taking to improve training, strengthen underwriting, and collect more reliable data.
“Our role is to ensure the industry meets the standards it has set for itself through the Code,” Ms McClelland said.
“That means decisions that reflect evidence and individual circumstances, and better outcomes for customers.”
Read the full report attached with this media release or on the Life CCC website from Tuesday 16 September: Mental health and life insurance: Compliance with Code obligations.
About us:
The Life CCC is an independent body established to monitor compliance with the Life Insurance Code of Practice. Its purpose is to ensure consistent and high-quality service standards are maintained for the benefit of consumers. This also works towards increasing trust and confidence in the life insurance industry.
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