News

A coalition of consumer organisations have issued an ultimatum for general insurers to implement a 10-point plan to address significant flaws in its redrafted General Insurance Code of Practice.

The Insurance Council of Australia recently released a redraft of its General Insurance Code for public consultation. A joint consumer submission to that consultation has raised serious concerns with the redraft and is critical of the watering down and removal or current Code protections, and the failure to sufficiently address key recommendations made by Government and the industry’s own Independent Review.

The coalition – made up of 10 consumer organisations – have put forward a 10-point plan to lift the General Insurance Code to a level that would ensure the redrafted code:

• respects and implements the recommendations from the 2024 Parliamentary Inquiry into the Insurers Response to the 2022 Floods
• uplifts the quality of the code to a standard where ASIC can approve it, and
• ensures that insured consumers are protected from poor claims handling behaviour in the future.

The 10 points to strengthen the General Insurance Code are as follows:

1. Establish enforceable minimum standards to assist consumers experiencing vulnerability
2. Support customers experiencing insurance premium hardship
3. Address issues relating to cash settlements including the provision of actionable quotes
4. Improve the approach to expert reports including automatically giving them to customers in standard formats
5. Proactively communicate and manage claim fulfilment processes
6. Strengthen the reliability and effectiveness of sum-insured calculations
7. Curtail use of “circumstances beyond our control” to rein in delays in claims handling
8. Restore effective oversight by an independent Code Governance Committee
9. Apply all Code protections to small businesses
10. Remove exceptions to ensure a genuinely enforceable Code

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. Yes, we welcome the handful of new protections in this redraft and yes, we welcome the announced intention for the Code to be enforceable as a part of the contract between insurers and the consumer. However, the trade-off for an enforceable Code cannot be a weakened Code.”

“Our analysis shows that insurers have either watered down or walked away from 65 consumer protections found in the current Code. And insurers have either partially met 51 recommendations of the Independent Code Review and the Parliamentary Flood Inquiry (40%) and have not met 41 recommendations (32%) at all. It’s simply not good enough”.

“With trust in general insurers currently languishing at 17% – its lowest level in 11 years of CHOICE Consumer Pulse research – general insurers have a lot of work to do to regain the confidence of the Australian community.”

“The 10-point plan we are putting forward can help the general insurance sector begin to address this trust deficit.”

“Government intervention may be needed if general insurers once again fail to meet the moment and act on this 10-point plan to strengthen the flawed redraft.”

Quote from Mark Holden, Acting Director, Mob Strong Debt Help

“It is disappointing that the amended Code has not gone further in taking the steps insurers need to take to meet First Nations people where they are. First Nations people are more likely to feel the prejudice of a one-size-fits- all approach from insurers without genuine engagement and providing a culturally appropriate service. An enforceable code with specific minimum standards are needed to help mob know and apply their rights for a fair and certain outcome.”

Quote from Louise Hayes, National Coordinator Disaster Recovery with Financial Counselling Australia

“The Code must be strengthened with enforceable standards. Leaving key protections voluntary means there is no guarantee customers experiencing trauma, financial hardship, disability, family violence or disaster impacts will receive the support they need and these are often the people who are least able to advocate for themselves.”

Quote from Meg Dalling, Assistant Director, Consumer Action Law Centre

“Trust in insurance is at an all-time low and the insurance industry is at a crossroads with this Code review. This review presents an opportunity for the insurance industry to truly deliver on its social licence by strengthening consumer protections and accountability. A stronger Code must underpin the industry’s public commitments to rebuilding that trust so that insurance can continue to support consumers when they need it most.”

Quote from Andy Kelly, Director of Campaigns, CHOICE

“At a time when trust in insurers is at rock bottom and most Australian households are facing mounting cost-of-living pressures, any proposed weakening of consumer protections should be strongly rejected. General insurance is essential and all consumers deserve to be treated fairly by insurers – that’s more important now more than ever.”

Quote from Tyrone Shaniman, Chair, Australian Consumer Insurance Lobby

We have agreed to support the consumer coalition’s 10-point plan in the interests of progressing consumer protections. However, our support should not be taken as an endorsement of the Code Review outcomes. In our view, the proposals do not go far enough and represent a compromise rather than the level of protection consumers deserve. By failing to address a number of significant issues now, those issues will inevitably be left for future Code reviews.

Quote from Damian Stock, CEO, ARC Justice

“Regional communities know better than most what good – or bad – insurance can mean after a disaster. Since the devastating floods across northern Victoria, including Rochester, Seymour and surrounding communities in late 2022, ARC Justice has worked alongside people navigating complex insurance claims while trying to rebuild their homes and lives.

“We have continued that work through the 2024 floods in western Victoria and, more recently, in communities affected by this year’s summer bushfires, including Harcourt and Ruffy. We’ve seen firsthand how delays, poor communication and unfair claims handling can compound the trauma of a disaster and leave people waiting months, or even years, to move on.

“We welcome the decision to make the Code enforceable and the stronger consumer protections included in the re-draft. However, it’s disappointing that many of the recommendations flowing from the Flood Failure to Future Fairness inquiry, particularly those aimed at improving claims handling after disasters, haven’t been adopted.

“This was a chance for the insurance industry to show it had learned from the experiences of disaster-affected communities. While the re-draft makes some progress, it doesn’t go far enough. People rebuilding after disasters deserve an insurance system, and a Code, that works for them when they need it most.”

Read the full submission and recommendations (PDF).