Claims Delay Sanction Puts Life Insurance Service in Focus

The committee found the insurer had not asked claimants for required information at the earliest appropriate opportunity. That may sound like a procedural issue, but in life insurance it can have very real consequences. When a claim stalls, families can face uncertainty, and businesses relying on key person cover may be left without timely funds to manage debt, replace specialist skills, reassure lenders or stabilise cash flow.

As a sanction, the insurer received a formal warning and must undergo an independent audit of its compliance with the Code. That audit will examine how it requests information from claimants, whether corrective actions are working, and whether oversight arrangements are strong enough to prevent repeat failures. The committee linked the problems to staffing shortfalls, capability gaps, outdated claims practices and insufficient monitoring.

For Australian business owners, this is another reminder that price should not be the only consideration when arranging life insurance for a founder, director or revenue-critical employee. Competitive premiums matter, but claim service, policy wording, documentation standards and insurer governance can be just as important when a business is under pressure.

This story also extends the broader concern already seen across the life insurance sector: improving claim timeliness is now a conduct, compliance and trust issue. A policy that looks affordable at the outset may offer poor value if the claims pathway is unclear or if delays create avoidable financial strain.

Before choosing or renewing cover, businesses should consider whether the insurer provides clear claim requirements, realistic timeframes, accessible support and transparent communication. It may also be worth keeping internal records up to date, including ownership structures, loan agreements, board resolutions and evidence of the insured person's role in the business. These practical steps can help reduce friction if a claim is ever made.

For companies reviewing cover, the key takeaway is simple: compare keyperson life insurance on more than cost. Claims performance, service culture and compliance history should all form part of the decision. Where the structure is complex, seeking specialist advice may help ensure the policy is fit for purpose before it is needed.