The general insurance industry’s new code of practice is a long awaited and necessary advancement, according to the Financial Rights Legal Centre (Financial Rights) and Consumer Action Law Centre (Consumer Action).
The new General Insurance Code of Practice—announced today by the Insurance Council of Australia (ICA)—is a set of rules for insurance companies. The new iteration of the code makes a series of new commitments, including towards people experiencing vulnerability.
Karen Cox, Financial Rights’ Chief Executive Officer, said that insurers have been failing vulnerable customers for some time, such as those with communication problems, those experiencing poor mental health and those suffering from family violence.
“Following intense scrutiny in the Royal Commission, general insurers needed to step up and deliver better outcomes for policyholders and the community,” she said. “Insurance works well for a lot of customers, but when insurers don’t deliver on their promises the impact can be severe.
“On paper this code addresses a large number of concerns that we have raised and if met, should lift standards considerably.”
Gerard Brody, CEO of Consumer Action, applauded stronger commitments to those going through a period of financial hardship.
“Insurers need to recognise that people making claims can be at the lowest point in their lives having lost a house or motor vehicle or worse. It is important that insurers work with their customers in a compassionate, sensitive and empathetic manner to build trust and confidence in the relationship.”
The code will also include an entire new set of standards for insurance claims investigations—a common area of complaint heard on the Insurance Law Service operated by Financial Rights.
Cox said, “In 2016 Financial Rights released research into
insurance investigations which found that callers were complaining of incredibly
long interviews—sometimes over five hours in length—and felt bullied, harassed
and intimidated. To date there are few if any rules regulating the way insurers
conduct investigations. The new standards in this code will bring long overdue protections
for Australians subject to an investigation and we welcome general insurers
lifting their game here.”
ASIC can improve the Code
The ICA will be applying to Australian Securities and Investment Commission (ASIC) for approval of the new General Insurance Code of Practice. ASIC’s approval is an important process that can ensure code rules are robust, providing confidence to the community.
“ASIC should take an active and hands-on role in the approval process. There is much to commend in the new code, but the ICA have chosen not to make the code enforceable as a part of the contract; nor does the code cover general insurance distributors who operate under their own AFSL licence—a not insignificant portion of the sector. We call on ASIC to address this as part of its approval process.”
“Having said that, this new code is a vast improvement on what consumers have now and the sooner it can come into effect, the sooner consumers will be able to enjoy the new protections.”
For further information contact Drew MacRae, Policy and Advocacy Officer, Financial Rights on 02 8204 1386.