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The Financial Rights Legal Centre (Financial Rights), Financial Counselling Australia (FCA) and Consumer Action Law Centre (Consumer Action) have warned that government intervention may be needed if general insurers fail to meet the moment and significantly improve commitments made in a new redrafted code of practice, released today by the Insurance Council of Australia.

Quotes from Drew MacRae, Principal, Policy Development, Financial Rights Legal Centre
“Australian insurance policyholders have waited years for a stronger, more enforceable general insurance code of practice – one that will fix the poor claims handling practices that we’ve seen repeatedly after a string of extreme weather events.

“One change that will have tangible benefits for people is that the redrafted General Insurance Code will for the first time be enforceable by contract. Unfortunately, the trade-off is at the cost of a sufficiently strong code. It’s clear that the redrafted code released today fails to deliver for consumers on multiple counts. It is the industry writing its own rules. But let’s not forget that self-regulation is a privilege not a right.

“The redraft released today fails in multiple ways. Firstly, the redraft has watered down and removed commitments that are in the current code of practice. It has for example replaced strict timeframes with vagaries, undermined commitments on investigation practices, and whittled away the independence of the monitoring body overseeing their behaviour.

“Secondly, the redraft fails to address many of the key recommendations of the 2022 Parliamentary Flood Inquiry and the Independent Code Review. If insurers want to regain the genuine trust of their customers they will need to do much better than this.

“Lastly, general insurers approach to vulnerable consumers will largely be left to an aspirational guideline relying on internal procedures. We need an improved set of minimum standards that can be scrutinised by an external oversight body. This proposed approach leaves some of the most at-risk Australians at the mercy of a lottery, where depending on the insurer, some policyholders will be treated well, and other not.

“Financial Rights will be undertaking a forensic examination of the redraft in the lead up to making a submission to this consultation to ensure general insurers take the necessary steps to introduce meaningful minimum standards that address core concerns.

“The current consultation is the industry’s last chance to step up and make the changes it needs to regain the trust of Australians. If they choose not to make those necessary changes, then it will be clear that the Government will need to step in to ensure general insurers get to where they need to be.”

Quote from Mark Holden, Acting Director, Mob Strong Debt Help
“It is crucial at a minimum that this code is able to accommodate the needs of vulnerable people, including First Nations peoples. First Nations people are more likely to experience prejudice with insurance such as insurance literacy, digital gaps, remoteness and inability to get help outside the insurer and even just trying to prove who they are. We want this code to ensure Mob are more empowered to engage with the insurer and for them to exert their rights. Right now, the Code sets aspirational standards without enough oversight to identify and respond to issues as they arise.”

Quote from Louise Hayes, National Coordinator Disaster Recovery with Financial Counselling Australia
Disasters can turn ordinary consumers into vulnerable consumers overnight. The redrafted Code of Practice must recognise that people navigating insurance claims after a flood, bushfire or cyclone are often dealing with trauma, financial stress and uncertainty. Strengthening vulnerability obligations via the mandatory uptake of the Vulnerability Guide, in the Code, is a critical step towards creating an insurance system that recognises individual circumstances, removes barriers to support, and delivers fairer outcomes for consumers experiencing hardship and disadvantage.”
“In the absence of a mandatory sector-wide uptake of the proposed Vulnerability Guide, the sector is relying on a ‘hope strategy’ that insurers will implement the Guide – and hope is not a strategy, it is merely dot points on a page.”

Quote from Meg Dalling, Assistant Director, Consumer Action Law Centre
“The insurance industry and Government have known about failings of industry practice and consumer protections for years, but still industry seems unable to deliver a code that will meet consumers’ needs. While there are a handful of improvements, there are more clawbacks including shifting protections for vulnerable consumers into unenforceable “guidance” – this is a slap in the face. Australian policyholders deserve fair treatment and adequate support. We want enforceable codes with robust obligations that lift the practices of insurers to do the right thing, especially when it comes to supporting customers in vulnerable situations.”

Media contact: Mark Pearce media@consumeraction.org.au or 0413 299 567