The Life Insurance Code review has handed down its Final Report. Here is what its 85 recommendations could mean for your claim

The review of the Life Insurance Code of Practice has handed down its Final Report, dated 30 June 2026. It makes 85 recommendations. Most of them would rewrite the Code itself, the rulebook Australia's life insurers agree to follow, which many in the industry are already calling "LICOP 3.0".

The headline change is on mental health. The old promise not to write "blanket exclusions" into standard policies is gone. In its place is a narrower ban on complete exclusions, plus a framework that lets insurers limit mental health cover if they can back the limits with data. Around that sits a genuinely tighter claims handling regime, and an enforcement question that has, once again, been pushed to the next review.

This article was first published on 27 July 2026. The recommendations it describes are proposals to the industry. They are not yet part of the Code, and nothing in them changes your rights today.

How the review got here

The review, led by Reviewer Peter Kell, commenced on 1 October 2025. A Consultation Paper published on 17 October 2025 drew 11 public and three confidential submissions. An Interim Report published on 10 April 2026 drew another nine public and two confidential. The Reviewer held over 50 meetings with insurers, consumer groups, mental health advocates, medical experts, lawyers and the regulators: APRA (the Australian Prudential Regulation Authority), ASIC (the Australian Securities and Investments Commission), AFCA (the Australian Financial Complaints Authority), the Australian Human Rights Commission, and the Life Code Compliance Committee (LCCC), the body that monitors insurers' compliance with the Code.

Two things shaped the final months. First, the industry body, the Council of Australian Life Insurers (CALI), lodged a supplementary submission in March 2026 arguing that the Code's existing restriction on mental health exclusions is "not sustainable" given the rise in mental health claims. Second, the Reviewer obtained advice from Counsel on when insurers can lawfully limit mental health cover under the Disability Discrimination Act 1992 (DDA). Both ended up defining the report's most consequential section.

The mental health settlement

Mental health was, in the Final Report's own words, "the most significant area of focus in the review". Mental ill health is now the leading cause of total and permanent disability (TPD) claims, accounting for almost one in three TPD claims paid and one in five income protection claims in 2024 (CALI, "Mental ill health is straining Australia's safety net", July 2025). Insurers have been openly warning that the products are under strain (CALI's March 2026 submission puts the industry's case). The Reviewer accepts the sustainability challenge is real. The question was what the Code should permit in response.

What the old Code said

Clause 2.1(b) of the current Code commits insurers, when designing new products, not to incorporate a blanket exclusion specific to mental health into the general terms and conditions of a standard form contract. The Final Report records that most stakeholders view that clause as a commitment to go beyond the minimum the DDA requires, and that the Reviewer accepts that position. CALI asked the review to remove it, so insurers can design products with mental health limitations to the extent the DDA allows.

What the Final Report recommends

The Reviewer has essentially accepted the industry's core position, with guardrails. The final package:

• Replaces clause 2.1(b) with an explicit commitment to comply with the DDA and other anti-discrimination laws, including sex, age, and state and territory legislation.
• Prohibits only complete exclusions. No policy in these product types can offer no mental health cover at all, and that includes designs where a customer can opt out of mental health cover entirely. The Reviewer is blunt about why: for the industry to "walk away" from mental health cover in disability products would harm consumers and undermine its social licence. Specific condition products such as critical illness cover are carved out.
• Permits limitations short of a complete exclusion, provided they comply with the DDA, are supported by documented actuarial or statistical data, and are reviewed at least every three years to confirm they remain necessary and proportionate.
• Requires a consumer guide. A plain English "Consumer Guide to Life Insurance and Mental Health" is to sit prominently on insurer websites, developed with input from consumer advocates and mental health experts.
• Defers the hard details to an industry process. CALI is to lead further work on principles for sustainable product design, including the idea that policies should still offer meaningful mental health cover and that any limitation should be defined as narrowly as practicable. The LCCC is asked to review how it works in practice before the next Code review.

The legal advice the Reviewer obtained (from Stephen Walsh of Counsel) matters here. It concludes that insurers can lawfully exclude or limit cover for mental health conditions under the DDA's insurance exemption, but only where the decision is backed by relevant actuarial or statistical data and is reasonable in all the circumstances. A total exclusion of all mental health conditions is harder to justify than a targeted one. In other words, the legal floor was never as high as many assumed. The argument was always about how far above that floor the Code should sit.

How to read the settlement

This is a negotiated outcome, and it reads like one. The industry secured the flexibility it asked for. Expect new standard policies to appear with mental health limitations, such as lower benefit amounts, shorter benefit periods or premium differences, justified by actuarial data. Consumers secured a hard floor (no policy can abandon mental health cover altogether), a transparency regime, and a promise of further work. Whether the settlement protects people in practice now depends on that further work, and on whether the LCCC scrutinises how "documented data" is actually used. The protections are real, but they arrive with homework the industry has not yet done.

A quieter change: written reasons for underwriting decisions

Less noticed, but significant for anyone applying for cover with a mental health history. When an insurer declines cover or offers non-standard terms, the Final Report says the reasons must be given in writing, the information provided must be the same whether you are declined or offered alternative terms, and, on request, the insurer must provide a plain English summary of the actuarial and statistical data it relied on, in enough detail to understand how it connects to the decision. Insurers would also have to explain, as part of the application, what mental health information needs to be disclosed and what does not. These changes apply to all underwriting decisions, not just mental health ones. For anyone who has been told "the decision was based on our underwriting guidelines" and nothing more, this is a meaningful shift.

Claims handling: what survived industry pushback, and what did not

The claims handling section reads like a negotiation over the mechanisms that let claims drift. It is worth being precise about what made it through.

Dropped or softened after feedback

• The 5 day information window is gone. The Interim Report proposed cutting the time insurers have to deliver key information at the start of a claim from 10 business days to 5. Industry said it was unworkable. The Reviewer accepted the shorter deadline was challenging and unlikely to improve outcomes given insurers still have to meet the overall claims handling timeframes, and the existing 10 business day standard stays. That proposal is described in our earlier piece on the review, written before the Final Report landed.
• The treating doctor rule is gone. A proposed obligation to consult a claimant's treating doctor before deciding whether they meet a medical definition was removed, after CALI showed existing claims processes already seek that information.
• Family violence wording softened, from doing "everything possible" to "everything reasonably possible" to protect a person's safety. A small but telling change.

Kept, despite industry objections

• Reopened claims get half the standard time limits. CALI argued reopened claims should have no fixed timeframe. The Reviewer disagreed, saying insurers should not be able to "restart the clock", and set limits of one month for income related claims and three months for lump sum claims such as TPD. That is half the standard timeframes.
• Progress updates must have substance. Updates will need to cover what has happened since the last update, what the insurer is waiting on, and, over industry objections, a reasonable estimate of when a third party delay will resolve. "Still in progress" will no longer do.
• A real person on every claim. Every claim must have a named primary contact who is an actual human being able to help with the claim.
• "Circumstances Beyond Our Control" gets a structure, and a spotlight. The catch-all provision insurers use to extend claims beyond the standard two and six month limits will be restructured with clearer components, including fixed timeframes where insurers rely on suspected non-disclosure or fraud investigations. The LCCC is to publish data on how often, and on what grounds, insurers invoke it.
• Surveillance stays capped. CALI asked for the ability to run multiple four month surveillance periods per claim. The Reviewer refused, on the basis that this would amount to open-ended surveillance, and held the line at one defined period of no more than four months, with a narrow, documented exception if material new information emerges.
• Decisions inside the clock. Insurers must tell claimants their decision within 15 business days and within the overall claims handling timeframe, closing off the practice of tacking notification time onto the end of an already long process.

The pattern is consistent. The Reviewer conceded the process changes that mostly created administrative load, and kept every change aimed at the mechanisms that let claims drift: reopened claims, vague updates, the beyond-our-control provision, and surveillance. For claimants, that is the right trade.

Enforcement: teeth now, contract later

The perennial criticism of industry codes is that they are promises without consequences. The Final Report's answer comes in two parts, one immediate, one deferred.

Now: the LCCC's sanction powers get a genuine upgrade. Restrictions that stopped it applying Community Benefit Payment sanctions to breaches reported to ASIC are to be removed, prescriptive thresholds on those sanctions go, and the LCCC will be able to name insurers involved in its inquiries and reports. How long a breach lasted, and how long it went undetected, becomes a factor in whether it counts as a "Significant Breach". For a body that has historically reported breach data anonymously, naming names is the power most likely to change behaviour.

Later: on the bigger question, making the Code contractually enforceable so its commitments become terms a customer can actually hold an insurer to, the Reviewer supports it in principle and recommends the eventual removal of the clause (8.10) that currently keeps most of the Code out of contracts. But the timing is complicated by the mental health work and the Government's proposed mandatory service standards for superannuation, so the process is handed to CALI and built into the terms of reference for the next review. The Reviewer also recommends that CALI should not seek to have any provisions designated as ASIC enforceable code provisions, the statutory alternative. So: contractual enforceability, endorsed but parked. In the meantime, ASIC approval of the Code, which the report says should not wait for the mental health issues to be resolved, and five-yearly reviews are the accountability mechanisms on offer.

The rest of the package, briefly

• Vulnerability: the Code is to adopt the definition and key principles of the Australian standard on consumer vulnerability (AS 22458), recognise that anyone can become vulnerable at any time, and add bereavement, cognitive impairment and trauma to the risk factors that should prompt an insurer to offer extra care.
• Financial hardship: insurers will need to watch for listed hardship risk factors, including customers asked to repay an overpaid benefit, ask about support when they appear, contact customers about hardship options within five days, and give 20 business days' notice before support ends.
• Funeral insurance: perhaps the cleanest consumer win in the report. Funeral policies would need a "premium guarantee", meaning the benefit paid is the higher of the sum insured or total premiums paid, with premiums refundable if a policy held for two years or more is cancelled. Funeral insurance could not be sold to anyone under 40, or to anyone who already holds a funeral policy.
• Premiums: insurers must explain, early in the sales process, how premiums behave over time, including what happens when an upfront discount ends. The Reviewer declined to prohibit upfront discounting itself, treating pricing as a matter for regulators rather than the Code.
• Medical definitions: the Code's medical definitions move to a standalone guide maintained by an expert panel, reviewed at least every three years, with a new requirement to explain to a claimant which definition was applied and how the results compare.
• Genetic testing: the Code's moratorium is removed, not weakened but superseded, because the ban on using genetic test results in life insurance underwriting is now in the Insurance Contracts Act. The report flags, without resolving, the position of people who received adverse underwriting outcomes before the ban.

What this means if you have a claim, or are thinking about one

None of this changes your rights today. The recommendations now go to CALI and the industry, which must decide what to adopt and then redraft the Code. The report itself acknowledges this will take time, and some parts, including the mental health guidance and the superannuation service standards, are explicitly left open. The current Code, with its existing timeframes and commitments, keeps applying in the meantime.

But the direction is now settled, and three practical points follow.

• The current standards already give you something to point to. Two months for an income protection decision, six months for a lump sum decision, updates at least every 20 business days, and an explanation when a claim runs long. These are in the current Code and apply now. If your claim has drifted past them without explanation, you can ask why, and you can ask in writing.
• The cover you hold today is governed by the policy you hold today. The new design flexibility is about future products. Whether your existing policy covers a mental health condition, and on what definitions, turns on its wording. That wording can be hard to read, but it is the document that matters, and it is worth understanding before assuming anything about your situation either way.
• New policies will diverge on mental health. As redesigned products reach the market, the differences between policies will widen. The report's transparency measures, the consumer guide, the premium explanations and the written underwriting reasons, exist precisely because those differences will be hard to see unaided.

If you want to talk any of this through, we'll explain which doors exist for your situation and, if you want, introduce you to a firm on our panel. It costs you nothing. You never pay us. Panel firms do.

This article is general information only. It does not take your personal circumstances into account and is not financial, legal or medical advice. What applies to any claim depends on the relevant policy wording, legislation, medical evidence and individual circumstances. The recommendations discussed are proposals to the industry and, as at the original publication date, were not part of the Life Insurance Code of Practice.

Sources and further reading

• Review of the Life Insurance Code of Practice, Final Report (30 June 2026) and Interim Report (10 April 2026), including published submissions and Counsel's advice, at lifecodereview.org.au
• CALI, supplementary submission on mental health (24 March 2026), Life Code review website
• CALI, Mental ill health is straining Australia's safety net (July 2025), drawing on 2024 CALI-KPMG cause of claims data
• Actuaries Institute, response to the Interim Report (12 May 2026), Life Code review website
• Life Code Compliance Committee, submission on the Interim Report (May 2026), Life Code review website
• APRA, Jane Magill, "TPD sustainability: a product made for one world tested in another" (speech, All Actuaries Summit, 27 May 2026), apra.gov.au