The General Insurance Code Governance Committee warns more sanctions for breaches are coming – and it wants to name insurers routinely in its reporting.

As insuranceNEWS.com.au has reported, the committee imposed its first financial penalty on Allianz last month, under powers introduced when the code was last upgraded and implemented in July 2021.

In its submission to the current code review, the committee says its sanction powers, which include the ability to name and shame and/or impose a community benefit payment of up to $100,000, are sufficient, but it expects to use them more.

There was a delay in imposing financial penalties following the last review after it emerged that the committee’s indemnity cover “wasn’t sufficient”.

GM code compliance and monitoring at the Australian Financial Complaints Authority Prue Monument tells insuranceNEWS.com.au the issue “took longer to resolve than the Insurance Council of Australia or the [committee] would have liked. But it’s resolved now. And so we move forward. The committee, through its investigations, has still been able to have a really important impact in addressing non-compliance and improving practice.”

Ms Monument declined to comment further on the Allianz decision, pointing to the committee’s statement at the time.

But she says a “sanction of this nature is reserved for more significant breaches. In the context of sanctions and when they will be applied, it is around not so much isolated incidences, but more serious systemic concerns.”

And she is clear it won’t be the last.

“The committee has a number of investigations under way, and certainly sanctions are being considered in some of those matters. 

“Obviously, it’s ultimately a decision for the committee, and there’s a range of sanction options open to the committee to consider. But there will be more sanctions to come.”

Ms Monument believes the $100,000 maximum penalty is sufficient, and that such relatively small amounts can still act as a deterrent for Australia’s largest insurers.

“I think financial penalties and other sanctions, including naming, can be an important deterrent.

“It makes clear to others that there are consequences for serious and significant non-compliance. It makes clear to other insurers where things went wrong, and hopefully helps them avoid the same sorts of issues or challenges and address any gap. 

“Ultimately, our goal is to drive improved practice and deliver better outcomes for the consumers in line with the promises set out in the code. 

“Currently, we think that the suite of sanction powers available to the committee is appropriate.”

However, as part of the code review, the committee is seeking the ability to name insurers in its reporting and inquiry work as it aims to drive down breaches, which soared to a record 77,886 in the 2022-23 financial year.

“That is really in line with contemporary practice, what the Australian Securities and Investments Commission and AFCA are doing, and we see real value in increasing accountability, and what that can do to also drive improved practice and bring down breaches,” Ms Monument says.

“But it does take careful consideration, because it's really important that members of the public, members of the media, others, understand that breach reporting in context. 

“It needs to be put within the context of the size of the insurance business.”

As insuranceNEWS.com.au has reported, the ICA’s code review submission suggests “greater flexibility” around claim communication with customers.

The obligation to update claimants every 20 business days is the most breached, hitting a new high of 28,189 breaches in 2022-23.

But Ms Monument believes the obligation is “very achievable”.

“We think it’s important that the industry doesn’t step back from that commitment. 

“We’ve seen it in a really compelling way that where consumers don’t feel they are getting the updates and information they need, it leads to unnecessary frustration and it leads to increased complaints.

“We think it is something that [insurers] can absolutely get right. And we’ve seen a number of them improve their approach.

“The updates need to be meaningful and we think insurers can find better solutions to keep their customers updated and informed. 

“I think if they pull back on that, we’ll just continue to see increased frustration on the part of consumers and ongoing internal dispute resolution and external dispute resolution challenges, which ultimately costs insurers, and it impacts their reputation.

“I think the underlying problem still speaks to the very manual nature of the insurers’ approach. And we’re quite confident that there can be a really efficient and effective way to make sure people are given the updates that they need.”

Click here to read the committee’s code review submission in full.