Consumer advocates have condemned repeated failings by insurance companies after the General Insurance Code Governance Committee (CGC) imposed sanctions on AIG Australia Limited (AIGAL) for serious breaches of the General Insurance Code of Practice.

This is the third financial sanction in 12 months imposed by the CGC on an insurer. It highlights a troubling pattern of non-compliance and raises questions about the effectiveness of self-regulation in the insurance sector.

“This again exposes whether self-regulation in the insurance industry is working for consumers,” said Peter Gartlan, co-CEO of Financial Counselling Australia.

“Insurers are not meeting even their most basic obligations under the Code. And once again, it’s the most vulnerable in our community who are paying the price.”

The CGC found that AIGAL failed over multiple years to tell hundreds of customers that their complaints had been delayed or that they had the right to escalate their complaint to the Australian Financial Complaints Authority (AFCA). As a result, many were left in the dark and unaware of their rights.

“These failings aren’t just paperwork errors. Financial counsellors know they cause real harm to people who are already under significant stress and seeking help,” Mr Gartlan said.

“When an insurer ignores or delays a complaint, it erodes trust, disempowers the customer and undermines confidence in the system.”

Financial Counselling Australia, Consumer Action Law Centre and Financial Rights Legal Centre welcome the sanctions imposed on AIGAL, which include a $30,000 community benefit payment, an independent audit and mandatory public disclosure.

However, Mr Gartlan said the $30,000 payment is very low and these measures are not enough to stamp out future misconduct.

“With the Insurance Council of Australia now rewriting the Code, this is a critical opportunity for reform,” Mr Gartlan said.

“Any new Code must deliver stronger consumer protections. Just as importantly, it must be enforceable. The current approach is not delivering accountability.”

Consumer advocates are calling on the insurance sector, via the Insurance Council of Australia (ICA), to:

• Fully implement all 86 recommendations from the Mulino Report, the parliamentary inquiry into insurer responses to the 2022 disasters
• Adopt all 101 recommendations from the most recent review of the General Insurance Code of Practice
• Ensure any new Code of Practice delivers real enforcement and clear consequences for non-compliance

“Consumers who can least afford poor practices are the ones bearing the brunt of insurer failures,” Mr Gartlan said.

“We don’t need more reviews. We need action. The time for accountability is now.”

Quotes attributable to Stephanie Tonkin, CEO Consumer Action Law Centre:

"We have serious concerns about the industry's capacity to self-regulate, as we are still uncovering failings from the 2022 insurance crisis.  For it to work, the new Code needs to substantially uplift both consumer protections and penalties for noncompliance for it to have any meaningful impact on the status quo. We already know the fixes that we need - it's up to industry to implement them in good faith."

Quotes attributable to Drew MacRae, Senior Policy and Advocacy Officer, Financial Rights legal Centre:

“This is a shocking example of poor complaints handling processes, one in which demonstrated a real disregard for the needs of customers at the time they needed it the most, and one compounded by the lack of action to improve things over an extended period of time. Is it any wonder insurance consumers have lost faith in a sector to do the right thing? It is critical the consumers have faith that their complaint will be managed and responded to by their insurer in a reasonable timeframe.”

“We are glad to see the CGC using its sanctions powers to call out this behaviour and hopefully spur action at AIGL and at other code subscribers to improve their complaints handling processes. It is particularly pleasing to see the CGC naming the insurer in this case –this really should be the standard for all breaches of the code. If the insurer’s promise expressed in the code is to mean anything – we need to know who is not meeting that promise.”

Media contact: media@financialrights.org.au