The General Insurance Code of Practice is not fulfilling its purpose and non-compliance is often met with limited consequences, a consumer group says in a submission to an independent review. 

The Australian Consumers Insurance Lobby has made 52 recommendations aimed at addressing code shortcomings, which it says were evident in the industry’s 2022 flood response, currently the focus of a federal parliamentary inquiry. 

“The code is often leveraged as a marketing tool and as a shield during inquiries to demonstrate good conduct within the industry,” the submission says. “However, the inquiry into insurers’ responses to the 2022 floods revealed significant consumer dissatisfaction, highlighting a gap between the code’s intentions and its actual impact.” 

ACIL believes the handling of issues associated with service suppliers represents the most critical area for change in the code review, and suggests a new section on managing conflicts of interest. 

On claims handling, recommendations include explicit consequences for failing to meet time frames, and it says consumers should have to right to appoint an independent advocate for significant owner-occupied home claims, while the insurer should cover a portion of the claim preparation fee. 

The lobby says consumers should not lose policy benefits such as loss of rent or temporary accommodation benefits due to unreasonable delays caused by insurers or their service suppliers. 

In other areas, the group proposes mandatory empathy training and that the code explicitly include the principle of contra proferentem, which would mean any ambiguities in insurance contracts are resolved in favour of the consumer. 

ACIL recommends the introduction of a graduated penalty mechanism closely tied to compliance levels, and suggests an annual scorecard be issued for each insurer. 

“The current state of the code is unacceptable and does not fulfil its purpose to protect consumers effectively,” lobby chair Tyrone Shandiman said. 

“If significant enhancements are not integrated into the revised code, ACIL will take further actions to ensure that the necessary protections are firmly established.”

The independent review of the code of practice is being conducted by former Australian Prudential Regulation Authority deputy chair Helen Rowell, consumer expert Gerard Brody and insurance expert Paul Muir.

A consultation paper was released in April and submissions are due by the close of business on Friday. The panel is scheduled to release its first report in the middle of this year.