Code changes alone will not address mental health claim cost pressures, Peter Kell has warned in wrapping up his review of the Life Insurance Code of Practice.

While Mr Kell made many mental health-related proposals in his final report, he said: “The issue for the review is what the position in the code should be going forward.

“The range of views expressed by stakeholders relating to the coverage of mental health conditions in the code is wide-ranging … there are aspects of this issue that cannot simply be resolved at this point through a change to the code, but rather will require industry to engage with stakeholders to consider in more detail an appropriate path forward that supports both sustainability and the fair treatment of customers.”

The Council of Australian Life Insurers says its preferred approach is for the code to permit design features in new products that limit cover for mental health conditions that fall within exemptions under the Disability Discrimination Act. However, consumer groups fear such limitations may hurt policyholders.

Mr Kell sought advice from lawyer Stephen Walsh on mental health questions, to help the industry and other stakeholders address the challenge.

“It is not the role of the reviewer to provide a definitive legal view on when insurers can incorporate exclusions or limitations on mental health cover,” he said.

“The purpose of obtaining this advice is to help guide recommendations in this area, rather than seeking to comprehensively resolve all possible legal issues in relation to mental health coverage in life insurance policies.”

Financial Rights Legal Centre principal Drew MacRae says the final report has delivered a series of “eminently reasonable” recommendations to improve outcomes for consumers.

“We particularly appreciate the unenviable role the reviewer has taken in tackling the complex legal challenges surrounding the application of blanket mental health exclusions in life insurance and agree with the reviewer that if life insurers were to ‘walk away’ from mental health cover altogether in disability products, then it would undermine their industry’s social licence,” he said.

“It would also run the risk of further litigation. We welcome the recommendation for further discussions on the issue.

“The life insurance sector needs to tread very carefully here to ensure that any steps they take in the name of ‘sustainability’ do not unfairly discriminate [against] Australians, in breach of the Disability Discrimination Act.”