Submissions in response to the issues paper produced by Ian Enright’s review of the General Insurance Code of Practice have begun to emerge. Some of the major points raised by various stakeholders are listed below.

The insurers, who will in the end dictate what goes into the revised code and what stays out, have made it clear in many of their submissions that open-ended change through the code is not appropriate or acceptable. It certainly won’t be a document that merely goes along with the consumer lobby’s extensive wish list.

The 69-page joint submission from consumer groups, legal advice organisations and financial counselling services makes a range of ambitious suggestions, while the insurers are determined that the code should direct market behaviour but not affect their ability to compete on service levels and policy features. Nor do they accept that the code should embrace industry sectors that are not in their direct control.

Product simplification: Suncorp says product structure and the offering of simplified products are outside the code’s remit and the current system encourages competition and provides consumer choice.

Auto & General Insurance (A&G) agrees, saying consumers will be disadvantaged if product simplification dictates that product features should be standardised.

The joint submission of various consumer groups says the larger issue is about appropriate products, and it recommends amending the code so that insurers provide better disclosure and information, such as key facts sheets for all insurance products and scaled advice.

IAG agrees that the product disclosure statement regime under the Corporations Act is “less than ideal” and says it would support a “wide-ranging review of the regime” aimed at creating simpler consumer information documents for insurance products.

But it says the code is not the appropriate place to address these shortcomings.

Total replacement cover: Suncorp says the code could not “be an enabler” for increasing the availability of total replacement cover, as this depends on many factors, including reinsurance.

Similarly, IAG says that the code is not “an appropriate or effective instrument” for increasing the availability of total replacement cover.

“Currently, the key influence on the availability of total replacement value insurance is the lack of appetite on the part of reinsurers to cover it,” it says, noting reinsurer concerns about uncertainty in claims cost exposure, rebuilding costs and the need to assess and capitalise losses.

A&G says consumers are in the best position to determine the value of their home, the insurance they want and the risk they are prepared to accept. If total replacement cover became mandatory, insurers would be likely to “over-value” their estimates.

Consumer lawyers want to see greater availability of replacement cover and say at a minimum the code should require all insurers to provide tools for consumers to be able to realistically estimate replacement value.

Notification of dispute resolution systems: Insurers don’t want to start dealing with a claim by talking about possible disputes. IAG says the notification of internal dispute resolution (IDR) and external dispute resolution (EDR) rights at the time of claim lodgement “creates a negative communication with the customer from the outset” and “would not be conducive to a good customer experience”, as well as leading to longer call times.

Suncorp and A&G agree, with Suncorp saying this “would establish the expectation that a complaint will be made”.

The consumer groups say insurers should have to notify claimants about IDR and EDR within two months of claims lodgement if the insurer has not made a decision on the claim, noting that consumers affected by the 2011 floods often experienced “total confusion about what to expect”.

Consumer groups want to see claims not determined within four months automatically referred to IDR, and say the Insurance Council of Australia should not be able to vary the code in an extraordinary event or disaster, as the timelines for claims decisions are generous enough to accommodate disaster volumes.

Both Suncorp and IAG reject amending the code to automatically move all claims not determined after four months to IDR.

“Complex claims, waiting for external reports, delayed receipt of claims information from the policyholder and other similar delays can push the determination time beyond four months, even though the insurer is acting as swiftly as possible,” Suncorp says.

“It may not always be necessary or appropriate to refer a claim to IDR only because of the length of time it has been on foot,” IAG says. “Depending on the circumstances the claimant may be comfortable with how the matter is proceeding.”

Suncorp rejects time limits on the finalisation of claims once accepted, but, along with RACQ Insurance, supports extending from six to seven months the time allowed for a customer to request a natural disaster claim to be reopened, while IAG says it is “not aware any evidence that an extra month could make a substantive difference to the claimant”.

Code presentation: Suncorp says the code could be more “user-friendly” and supports further consultation on how the language could be simplified or presented better.

IAG says the code is “for the most part sufficiently clear and easy to understand”, but that some sections would benefit from greater clarity.

Consumer groups argue for the code to be written in plain language and say very few customers are aware of the code and “the lack of prominent promotion of the code to customers is real, concerning and must be addressed”.

They say insurance industry staff also need more training about the code.

RACQ Insurance says there is adequate awareness of the code within the industry. It supports efforts to promote awareness among service-providers and agrees there is a relatively low level of awareness among the general community.

Consumer groups say the code should apply to all insurers.

Suncorp believes that forcing all general insurers to sign up could lift minimum service levels and says it would support the participation of all insurers licensed by the Australian Prudential Regulation Authority (APRA) – although it notes the Government did not pursue mandatory code participation as recommended by the Natural Disaster Insurance Review.

IAG says code membership should continue to be voluntary, adding that code compliance cannot be made compulsory without legislative intervention. But it suggests adoption of the code could be made a condition of Financial Ombudsman Service membership, which would essentially require all insurers to adopt the code. 

RACQ Insurance says membership is outside the review’s terms of reference and it agrees with the Government that current arrangements are appropriate because there should be room for insurers to develop their own standards of conduct. 

Selling agents and brokers: RACQ Insurance says the code should apply to agents that sell insurers’ products but “the code is not and should not be compulsory”. Code participants may be able to ensure that brokers and others comply with the code, but not all referrers and brokers have a relationship with the code participant that would allow that level of direction to be given.

“For example, RACQ Insurance makes a distinction between online agents who are granted access to RACQ Insurance’s system to process sales, and offline agents who have no power to sell products on behalf of RACQ Insurance but who refer customers to RACQ Insurance’s telesales department.” The insurer says it should not be required to ensure that “offline” agents follow the code.

It also identifies problems with applying the code to claims service providers, saying this is impracticable and could delay claims settlement. RACQ Insurance says it has agreements which vary between the different categories of service providers.

The National Insurance Brokers Association’s (NIBA) submission argues that its members are already covered by the NIBA code and that bringing them into the insurer’s code would cause unnecessary complexity and costs.

But consumer groups want the code to apply to all insurance industry agents and service providers, including distributors, without exceptions. They say selling agents and claims service producers can engage in misleading and deceptive conduct.  

The groups’ combined submission says agents have misled consumers about coverage and exclusions while claims service producers such as assessors and loss adjusters have provided hydrology analyses when they are not qualified.

IAG says that it believes that as it currently stands, the code provides sufficient coverage of both selling agents and claims service providers. “It is our view the existing level of coverage for authorised representatives, agents and suppliers is appropriate and proportionate,” it says.

Consumer groups have many recommendations for how insurers should treat people suffering hardship, with the Western Region Legal Centre’s submission calling for this section of the code to be overhauled and the definitions of “disadvantage” expanded.

It recommends all correspondence from insurers’ agents or representatives, such as debt collectors, must identify the insurer.

Consumer groups also say the code should contain a standard for an insurer to notify an insured before cancelling a policy, and notify them after a policy has been cancelled.

They want to see changes for people affected by financial hardship, citing cases of car accidents where the insured or the other driver was unable to pay the excess for repairs. It says the code should also apply to debt collection agencies and should set standards for investigations into claims.

Suncorp also wants to see the code amended to reflect common industry practices relating to financial hardship and working with Legal Aid. “This will help ensure consistency throughout the industry, especially for emerging issues such as financial hardship and communicating with policyholders via their preferred method.”

The insurer says ICA should work with financial counselling bodies to train frontline financial counsellors and legal aid staff about the code so they can assist vulnerable consumers.

IAG says there would be benefit “in making the processes and procedures around dealing with hardship cases more consistent, transparent and easily accessible”. 

“To that end we would support the inclusion of a high-level financial hardship standard covering both customers and third parties.”

But IAG warns that financial hardship issues should be considered on a case-by-case basis and that prescriptive standards in the code may inhibit this flexibility.

Code breaches: This has always been a tough issue for insurers to deal with. Suncorp rejects the “naming and shaming” of companies under investigation for code breaches, saying this could harm the reputation of an insurer which is later found to have complied with the code.

IAG is also against naming those under investigation. “It would be at odds with basic principles of procedural fairness to name a participant before an investigation has been completed and an allegation of breach or non-compliance has been substantiated.”

But IAG would support the code providing sanctions for a wider range of conduct if required to obtain ASIC approval of the code.

It also says it would be prepared to support the imposition of sanctions in a wider range of circumstances, “including possibly repeated and/or significant breaches even if the participant has taken action to remedy those breaches, subject to a process that has regard to procedural fairness”.

Consumer groups are arguing for financial penalties to cover significant breaches.

There are more submissions being processed by the reviewer, and the openness of the process indicates the next few stages of the review are likely to be carefully watched by a range of stakeholders.