The corporate regulator's review into insurance has uncovered concerns about how claims are handled but no evidence of industry-wide misconduct.
The Australian Securities and Investments Commission said on Wednesday that delays in claims handling and the evidence insurers require when assessing claims were the most common cause of disputes with customers.
The review of 15 insurers that make up 90 per cent of the industry showed that declined claim rates were highest for total and permanent disablement.
There were higher claims denial rates for insurance policies sold directly to consumers with no financial advice.
Some insurers had substantially higher than average declined claims rates and a substantially higher than proportionate share of disputes about claims.
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However, nine out of 10 claims made on four major types of life insurance policy between 2013 to 2015 were paid out.
"While not finding evidence of cross-industry misconduct, ASIC's review identified issues of conern in relation to higher claims denial rates and claims handling procedures," ASIC said.
In a related probe, ASIC's has obtained about 60,000 documents and has interviewed a range of people as part of its investigation into Commonwealth Bank's CommInsure.
ASIC said it will work with the Australian Prudential Regulation Authority and insurers over 2017 to establish a public reporting regime that details claims outcomes and dispute levels.
"To improve public trust, there is a clear need for better quality, more transparent and more consistent data on life insurance claims," it said.
Industry Super Australia chief executive David Whiteley said the recommendations were a step in the right direction, but that government should ban all sales commissions on life insurance.
"Given the importance of life insurance to Australians, the government and industry need to ensure that financial advice is only in the interests of consumers and all conflicts of interests are removed," he said.
Law firm Maurice Blackburn principal Josh Mennen said an enforceable code of conduct and a Royal Comission were the only credible options for reform.
"The report identifies that particular insurers remain a problem, but does not identify specific insurers against its findings," he said.
"The public has a right to know who the worst offenders are."
