Despite the Hayne royal commission and regulators hammering home messages about trust, culture and customer focus, a report by the General Insurance Code Governance Committee suggests that for some the message still isn’t sinking in.

The committee was left with serious concerns in the wake of the royal commission and launched an “own motion inquiry” into code of practice compliance frameworks.

Its report released today delivers some damning findings at a time when the industry faces renewed intense scrutiny amid the coronavirus pandemic.

The committee says in some cases insurers are reverting to black letter law in response to the royal commission, in an approach clearly not within the spirit of the code or the laws.

“Some subscribers’ responses point to weaknesses in compliance and reporting frameworks that represent an insufficient grasp of the scope and understanding of the meaning of the code,” it says.

Weaknesses include a poor understanding of standards that contain elements of honesty, fairness and transparency, and not fully appreciating the meaning of “significant breach” and obligations to report them to the committee within 10 business days.

About a third of subscribers describe robust compliance frameworks that meet expectations, while another third have some elements of best practice but room to improve.

Of the remainder, around 11% need considerable improvements while around 23% don’t describe their compliance framework in enough detail.

“Subscribers routinely attribute non-compliance with the code to human error or the result of an individual’s actions without demonstrating that they carried out a deeper examination of root causes and of the problems that led to the breaches,” the report finds.

The committee must feel as if its past messages and warnings have amounted to little more than whistling into the wind.

Just six of the 45 subscribers who took part in the inquiry said they provided some of the committee’s past publications directly to their boards, and even then, most could not specific which publications their boards had seen.

The committee’s report, Living the Code: Embedding code obligations in compliance frameworks contains 22 “clear and simple” recommendations to improve the situation and make the code “a living and successful document with valuable outcomes”.

The proposals cover breach and significant breach reporting, culture, leadership, governance and processes, and it has highlighted that it expects the report to be distributed throughout organisations.

Recommendation number one is: “Take breach identification seriously, ensure you have in place rigorous processes for identifying and reviewing breaches. Confirm code breaches before reporting them to the committee.”

The committee says the advent of the 2020 Code of Practice provides a “golden opportunity to conduct a root and branch review” to ensure a culture where the code is lived by all employees.

Insurers are encouraged to see the code as an “ethical blueprint” and a baseline for higher ambitions.

They are also warned against underestimating the importance of embedding “fairness” in everything they do, particularly given recent court decisions that have underlined the concept.

“Insurers should take care to remember that while being fair might not be captured exactly by the letter of every law, you are expected to treat it as a legal obligation,” it says.

The inquiry findings follow the release a month ago of the committee’s annual report, which also includes a section on current insights.

The annual report showed breaches jumped last financial year to 31,186 compared with 13,668 in the previous 12 months. The two standards most consistently contravened related to the handling of claims and complaints.

The increase has caught the attention of the House of Representatives Standing Committee on Economics, which is reviewing insurers as part of its ongoing review of the Four Major Banks and Other Financial Institutions.

The Code Governance Committee and the Insurance Council of Australia will be among those appearing before the committee to address the issue, and COVID-19 responses, on Wednesday.

The committee’s latest report highlights that the industry is under scrutiny and may not be given endless opportunities to gets its own house in order.

“Demonstrated compliance with the code is more critical than even in light of the Government’s post-royal commission proposal to make some code provisions enforceable,” Committee Chairman Lynelle Briggs says.

“As Commissioner Hayne warned financial services entities in his final report, if they don’t start taking their code obligations more seriously, they will lose the right to self-regulate.”

Ms Briggs says monitoring and reporting of breaches has improved since the committee started its inquiry, in a positive sign.

“We expect to see further improvements as subscribers implement the recommendations in this report and transition to the new 2020 code,” she says.

Hopefully, everyone is listening this time.