Consumer groups and other industry participants say the Code Governance Committee should have named an insurer penalised a maximum $100,000 for claims and complaint handling failings.

As reported in a Breaking News story earlier today, the code of practice breaches affected 35 customers, including 22 hit by weather catastrophes, but the committee has decided not to identify the insurer due to its co-operation and response. 

“As a deterrent and public accountability measure, it would be a lot more effective to name the company, even more so when the harms are significant and vulnerable customers are impacted by the insurer’s conduct,” Consumer Action Law Centre CEO Stephanie Tonkin told insuranceNEWS.com.au.

Financial Rights Legal Centre director of casework Alexandra Kelly says the sanction is an important reminder that the sector must lift its game on claims handling, and all recommendations from the parliamentary floods inquiry and code of practice review should be implemented.

“The CGC [Code Governance Committee] should be commended for its oversight and sanctioning of a general insurer member – holding insurance companies’ feet to the fire for poor claims handling. However, we think the CGC, and the code owner the Insurance Council of Australia, should name all insurers when sanctioning,” she said.

“This will help to better inform the public, who have lost confidence in the sector.”

Claims Hero founder Luke Dugdell says consumers deserve transparency and if an insurer has been fined for misconduct, its name should be made public without exception.

“This is where incentives matter. If insurers know they can breach the code, pay a small fine and avoid public scrutiny as long as they co-operate after the fact, what message does that send?” he wrote on LinkedIn.

“This approach doesn’t discourage misconduct – it signals that breaching first and fixing later is an acceptable strategy.” 

An insurance industry source says the decision not to name the company undermines the credibility of the sanctions process in circumstances where the breach warranted the maximum monetary penalty. The penalty itself would have a negligible financial impact for just about any insurer, the source says.

“The decision also undermines calls to expand the CGC’s ability to name insurers for code breaches when it is unwilling to use its existing powers in circumstances that clearly warranted it,” they said.

LimeBox Consulting, a business led by Rod Fitzgerald, has also questioned the impact of the financial penalty alone and the committee’s focus on the insurer’s response when deciding not to name it. 

“What about [its] inadequate, if not negligent, approach to managing the claims? Naming the insurer is more than appropriate. The code committee has failed its stakeholders here,” LimeBox said in a LinkedIn post.

The notice of sanction says the breaches represented serious problems with managing claims, including inadequate repairs, failure to identify and deal with mould damage, and significant delays caused by disputes around the scope of works.

The harm was amplified by a failure to respond to complaints when things started to go wrong, and the insurer’s failure to identify customers experiencing vulnerability. One customer had to make 12 complaints before the insurer addressed their issues.

The insurer reported that changes in its operations, including the introduction of specialised teams, added complexity to its claims management process. This contributed to the dilution of decision-making responsibilities, with customer requests or concerns going unaddressed.

The company has paid $1.2 million in compensation to affected customers, prioritised resolving their cases and has conducted a “comprehensive review” to address systemic claims handling issues.

The notice says that throughout the code committee’s assessment, the insurer sought to understand the root cause of its failures and acted to correct them, took full accountability for failures by reporting them proactively, transparently and unreservedly, and paid substantial compensation beyond standard industry practice. 

The financial sanction is the second imposed by the committee and is double the first penalty issued last year. In that case, the insurer was named.

The committee says the decision to withhold the identity this time recognises the insurer’s model response and encourages others to respond as comprehensively and effectively when identifying, reporting and addressing breaches. 

“The CGC recognises that naming an insurer is the strongest sanction, but it is not always the most appropriate,” a spokesperson told insuranceNEWS.com.au.

“In this case, while the insurer’s failures had serious consequences for customers, its proactive response was a key factor in the decision to not name it.”

The $100,000 community benefit payment reflects the severity of the breaches, ensuring a meaningful consequence while acknowledging the insurer’s accountability and swift action, according to the committee.

“Sanctions are tailored to the circumstances, and in this case, the conduct of the insurer once it   identified its failures set a strong example for the industry,” the spokesperson said.

“The CGC supports greater transparency and has advocated named reporting in regular reports. However, it is important to recognise that naming an insurer as part of a sanction serves a different purpose to naming insurers in general industry reporting.”