Several insurers have failed to take seriously their obligations to comply with the voluntary code of practice, the General Insurance Code of Practice Governance Committee has warned.
In a call yesterday for “decisive action”, Ms Lynelle Briggs, the committee chairperson, said the industry “now needs to step up, improve its game and take the Code more seriously”, according to a report in news.com.au.
“Compliance failures need to be addressed, not just given lip service. Subscribers should take a broad view when interpreting the Code’s standards, guided by the purpose and spirit of the Code, rather than seeking to limit their application or downplay their importance.
The committee’s annual report, released yesterday, notes a number of worrying trends.
Compliance frameworks used by some insurers remain very weak and point to a poor understanding of the Code’s meaning and obligations to report breaches within 10 days of business identification.
Of particular concern to the committee is growing evidence that some have engaged law firms to interpret the Code’s financial hardship standards “as narrowly as possible”.
Some insurers have also taken to using black-letter law in response to the Hayne royal commission which conducted an inquiry into financial services last year.
Ms Briggs urges the Insurance Council of Australia to “fully leverage” the Hayne royal commission’s proposals – which include applying and levying sanctions on subscribers – to strengthen the Code.
According to the report, last financial year saw 11,663 self-reported breaches. Further investigations and monitoring led to another 89 breaches being reported and the committee dealt with 22 other significant breaches.
Patrick Veyret, policy and campaigns adviser at consumer advocacy group Choice, said it was "no surprise" some insurers were not taking breach reporting seriously, as breaches of the Code were not enforceable and did not attract serious penalties.
Commissioner Kenneth Hayne's final report said that code of practice provisions in insurance should be made "enforceable," and the compliance committees that oversee these should be given powers to impose penalties for breaches of the Code.
The committee's report also said there were a total of 40.4m retail insurance policies in force in Australia, and insurers received gross written premiums of A$42.7bn ($30.4bn) in 2017-18, making profits of A$5bn.