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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

Code grows teeth with $100,000 deterrent

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The revised General Insurance Code of Practice is set to introduce a $100,000 punishment for “significant breaches”.

A final draft of the code, which has undergone a major revamp in the midst of the Hayne royal commission reforms, goes before the Insurance Council of Australia (ICA) board on October 31 for approval.

In an address yesterday at the National Insurance Brokers Association Convention on the Gold Coast, ICA President Richard Enthoven outlined some of the document’s key features.

“The new code will for the first time include a community benefit payable by members of up to $100,000 as a sanction for significant breaches – a strong message from the ICA board that industry self-regulation should have meaningful sanctions,” he said.

He also says Australian Securities and Investments Commission approval will be sought for the code, which will focus on vulnerable consumers.

“[The code] includes important new provisions that address mental health and, importantly, a requirement for insurers to implement a domestic family violence policy,” he said.

“Our industry can be rightly proud to play a role in addressing these two national crises.”

The new code will become mandatory following board approval, and a 12-month transition period will start on January 1. The family violence requirement will have a six-month transition period.

“This earlier implementation time is another strong message from the ICA board about the importance to the industry in prioritising our collective response to domestic family violence, which is a national tragedy,” Mr Enthoven said.

He says the new code will be key to helping the industry through a period of unprecedented disruption sparked by royal commission reform, changing community standards and “a raft of issues”.

These include climate change, new accounting standards, cyber risk, disruptive technologies, driverless cars and falling interest rates.

“When I think about the state of the industry, the word that comes to mind is busy. Very busy.”

Mr Enthoven says the insurance industry needs to work closely with community groups and regulators “if we are to navigate these challenges to ensure positive outcomes”.

“We are steering into a period of unprecedented change that could turn our industry on its head, creating winners and losers on an unprecedented scale. It truly is by equal measure both a challenging and exciting time to be in the insurance game.”

ICA spokesman Campbell Fuller told insuranceNEWS.com.au the details of the proposed community benefit and how it would be paid and distributed will be determined in consultation with members during the 12-month implementation period.

He says the size of the sanction, up to a maximum of $100,000, will take into account the affected company’s gross written premium and number of customers it has.