The Insurance Council of Australia (ICA) has suggested toughening Australian Financial Complaints Authority (AFCA) proposals to crack down on poor behaviour by paid representatives while seeking to ensure vulnerable customers who may come across as potentially threatening are not excluded.

AFCA has proposed exclusions of up to 12 months where there’s inappropriate conduct by a paid representative, but ICA has suggested greater discretion could allow for longer bans.

“For example, might there be an option to permanently exclude a paid representative who seriously takes advantage of a vulnerable customer and this significantly impacts their situation,” ICA says in a submission, while also suggesting “a third strike out rule” for repeated poor behaviour and exclusions.

The submission raises concerns over scenarios where a banned representative might “phoenix” by setting up a new corporate entity to sidestep exclusions, suggests AFCA consider a register of banned representatives, and seeks clarity over the paid representative definition in insurance contexts.

“Our members would welcome confirmation the definition captures the conduct of representatives who might not receive a direct payment to act on behalf of the complainant, for instance claims recovery agents, disaster chasers etc, who may receive a percentage cut of any compensation awarded or some other financial benefit,” it says.

AFCA has sought comment on 13 proposals in the most significant review of its rules and operational guidelines since the service was established. The changes were developed in response to a Treasury independent review.

Proposed changes would also give AFCA greater ability to manage unreasonable conduct by complainants, including a ban of up to 12 months.

But ICA says unintended consequences could include the exclusion of vulnerable customers who might be experiencing a mental health condition or circumstances that lead to them coming across as potentially threatening or intimidating.

The submission suggests AFCA may be able to explore whether the customer could be assisted by a representative, such as a family member, friend or consumer advocate, to engage directly with the complaints body, before an exclusion is put in place.

It also proposes the ability for a firm to raise concerns with AFCA if a customer might be engaging in unreasonable conduct towards a general insurer’s staff.

“This information might assist AFCA with considering whether to exclude a complainant,” it says.

Other AFCA proposed rule amendments would give it discretion to close a complaint if an “appropriate” settlement offer has already been made and would make changes to “forward-looking” reviews of decisions.

Treasury said AFCA decisions should continue not to be subject to merits reviews, while remaining reviewable for their application to future cases. For those reviews, AFCA proposes the threshold should be for decisions that adopt an approach that could have a significant impact across a class of consumers, businesses or transactions.

ICA seeks more clarification around how AFCA will decide the “appropriateness” of a settlement offer and makes suggestions on the review process, including that individual insurers would be able to request a formal review in addition to broader organisations and associations.

AFCA, which has received 37 formal written submissions on its proposals, expects to submit changes to the Australian Securities and Investments Commission next month. The amended rules and guidelines are planned to take effect from July next year.