The corporate regulator has announced a major crackdown on the life insurance sector after identifying "significant shortcomings" in the way claims are handled.

The Australian Securities and Investments Commission (ASIC) revealed claims for permanent and total disability (TPD) have the highest rate for rejection at 16 per cent, followed by claims for trauma at 14 per cent.

ASIC found that, while 90 per cent of claims are paid in the first instance, with payouts of $8.2 billion to 30 June 2016, there are "issues of concern" in relation to the rate of denied claims.

In particular, there were three insurers that had significantly higher denial rates in these areas, with one denying 37 per cent of TPD claims.

ASIC declined to name the companies with significantly higher than average denial rates.

Josh Mennen, a principal at law firm Maurice Blackburn, expressed frustration at that decision.

"The report identifies that particular insurers remain a problem, but does not identify specific insurers against its findings," he said in a statement.

"The public has a right to know who the worst offenders are."

While the review found no evidence of "cross industry misconduct" or systemic issues, it will ring alarm bells for a sector already under siege given recent scandals.

The review also found the most common area of disputes related to the evidence insurers required, including surveillance of people claiming on their policy.

The regulator's sweeping review of the life insurance sector was sparked by allegations of unethical behaviour at the Commonwealth Bank's insurance arm CommInsure, revealed in an ABC-Fairfax investigation.

ASIC calls for public reporting of life insurance assessments

ASIC deputy chairman Peter Kell said there is a "clear need" for the public reporting of life insurance behaviour in relation to the assessment and outcome of claims.

"Not being able to successfully claim on a life insurance policy can be financially devastating for a consumer and their family," Mr Kell said.

"It's important that the industry operates in a way that is fair and transparent."

The crackdown follows a review by ASIC which found that there were high rates of rejected claims on insurance policies sold directly to consumers without financial advice.

ASIC will work with the Australian Prudential Regulation Authority (APRA) to establish a new public reporting framework for life insurance claims and outcomes.

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APRA has already written to insurers asking them to improve information sharing with trustees, such as the superannuation funds through which many people have life insurance, increase cooperation to improve outcomes for policyholders and conduct regular reviews of policies to ensure they deliver appropriate benefits at an acceptable cost.

The regulation also plans "targeted follow-up" on individual insurers with high dispute and decline rates, especially in policies sold sold directly to consumers.

ASIC's review probed 15 insurers, covering 90 per cent of the market, and examined four major life insurance policies over three years.

The Financial Services Council, which represents the sector, yesterday released a life insurance code of conduct designed to address some of the problems raised by ASIC.

However, Josh Mennen said the code of conduct is weak and a royal commission is needed to find the full extent of the problems and suggest solutions.

"Only yesterday the Financial Services Council (FSC) released its own code of conduct - a code best be described as having all the bite of a month-old lettuce," he argued.

"It is little more than a restatement of the law that fails to deal with deep cultural and systemic industry issues.

"Both the Federal Government and the industry have been given plenty of chances to fix these problems but all that we have seen are soft measures that are completely inadequate."

'Ongoing' enquiries into CommInsure

At the same time, ASIC has released an update on its investigation into claims handling at CommInsure.

"Enquiries are ongoing. The investigation remains a priority for ASIC and we will provide public updates where appropriate," Mr Kell said.

As part of the CommInsure investigation, ASIC has obtained 60,000 documents and interviewed "a range of individuals."

CommInsure earlier announced it had updated its definitions of heart attack and severe rheumatoid arthritis and will reassess claims going back to May 2014.

Follow Peter Ryan on Twitter @peter_f_ryan and on his Main Street blog.