ASIC has slammed parts of the life insurance sector after a large review.

The corporate regulator found “significant shortcomings” in the way claims are handled, with claims for permanent and total disability (TPD) having a rejection rate of 16 per cent, followed by claims for trauma at 14 per cent.

ASIC probed 15 insurers, which account for 90 per cent of the market, as well as four major life insurance policies over a three-year period.

While 90 per cent of claims are paid in the first instance (payouts in the year to 30 June 2016 totalled $8.2 billion), “issues of concern” were raised about the rate of denied claims.

ASIC identified three insurers with particularly high denial rates, with one denying 37 per cent of TPD claims.

But the corporate watchdog has declined to name those or any other companies with high denial rates.

Legal experts are disappointed at the silence, saying the public has a right to know who the worst offenders are.

The most common area of dispute is in the evidence that insurers require, and the surveillance of people claiming on their policy.

ASIC deputy chairman Peter Kell says the insurance industry needs to let people in on the assessment process, and give more detail on the 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.”

ASIC is now working with the Australian Prudential Regulation Authority (APRA) on a new public reporting framework for life insurance claims and outcomes.

APRA has called on insurers to improve information-sharing with trustees, including from the superannuation funds that handle a lot of people’s life insurance.

It also wants more cooperation to improve outcomes for policyholders, and to set up a system of regular reviews to ensure policies are delivering stated benefits at an acceptable cost.

New regulations are set to include “targeted follow-up” procedures for individual insurers with high dispute and decline rates.

The Financial Services Council has released its own life insurance code of conduct to address some of the problems raised by ASIC, but it has already been described by John Mennen, a principal at law firm Maurice Blackburn, as having “all the bite of a month-old lettuce”.

“It is little more than a restatement of the law that fails to deal with deep cultural and systemic industry issues,” Mr Mennen told reporters.

“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.”