The General Insurance Code Governance Committee says insurers should expect financial sanctions in future, with issues that have limited its use of enhanced enforcement powers now resolved. 

The most recent code of practice review introduced a community benefit payment of up to $100,000 for severe breaches, but it has not been imposed despite the document taking effect in July 2021. 

GM Code Compliance and Monitoring Prue Monument told the parliamentary inquiry into insurers’ responses to the 2022 floods that sanction changes had required the Insurance Council of Australia (ICA) to strengthen indemnity for the committee. 

“It took longer than the ICA and the committee would have liked to resolve those legal complexities but they were resolved, and we’re certainly very much focused on how the sanctioning powers of the committee can be most appropriately applied moving forward, and insurers and the community should expect to see sanctions,” she said. 

Ms Monument says the preference is to work with companies to address concerns, and in most cases insurers take their engagement with the committee seriously and make changes to improve practices. 

Following the flood catastrophes, subscribers self-reported nine “significant breaches” and the code committee identified others through its work. 

“We had 23 investigations, and we have closed the majority of those,” Ms Monument said. “We have six that remain ongoing, which are quite serious and complex, and the committee is currently considering sanctions in some circumstances.” 

The code committee has called for the current independent code review to consider introducing the ability to name insurers in breach reporting. 

Ms Monument says the next version of the code should also include more specific requirements on cash settlements, as part of broader strengthening, and the committee supports registering the updated document with the Australian Securities and Investments Commission (ASIC). 

“The benefit we see in terms of having the code approved by ASIC is an added layer of rigour and confidence around the code,” she said. 

Registration also gives greater protection around changes or adjustments. If ICA or the industry wants to alter a regulator-approved code, there must be a broad consultation process. 

The Code Compliance and Monitoring Team headed by Ms Monument is a separately operated unit of the Australian Financial Complaints Authority and administers other industry codes. 

“As we move further away from the [Hayne] royal commission, we are seeing some concerning signs around pullback in promises,” Ms Monument told the inquiry. 

“What we’ve recently seen with the insurance brokers’ code is that the National Insurance Brokers Association made a decision in the absence of consultation to remove some really critical protections. We don’t want to see that happen here, and to be fair, that’s not been the approach of the ICA to date.” 

Ms Monument says having ASIC-enforceable code provisions is within the scope of the independent review, but carries the risk of subscribers “pulling promises back to the base level required by law”. 

The code governance committee is inquiring into the use of expert assessors and expects to complete a report in the third quarter of this calendar year. 

Ms Monument says experts are often not just giving opinions about the cause of loss or damage but are making recommendations on approving, denying or cash settling a claim, while insurance staff may not adequately scrutinise that information and the recommendations. 

“We want to see what training, governance insurers have around that,” she said.