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Laggards 'disappoint' on code hardship measures

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The General Insurance Code Governance Committee (CGC) says it’s disappointed that some firms missed a deadline for introducing new standards to help customers experiencing vulnerability and financial hardship, while “there seems to be some confusion” over compliance with one of the sections.

The CGC says the majority of subscribers introduced Parts 9 and 10 of the updated Code of Practice on time, but a number didn’t have measures in place despite communications that the new sections would take effect from January 1.

“Given the long lead time and heightened vulnerability caused by the COVID-19 pandemic, the committee is disappointed that these subscribers did not meet the implementation deadline,” it says in a report released today.

The changes coincided with a flood of regulatory activity but the committee says it expected subscribers would ensure obligations were met given the importance of the standards, which it describes as “some of the most significant changes” in the code.

In the case of Part 9, a new section supporting customers experiencing vulnerability and applying to retail insurance, 86% of subscribers met the deadline and all have now introduced the measures.

For Part 10, which replaced a 2014 code section with enhanced financial hardship provisions for retail and wholesale, 85% of subscribers completed implementation on time.

But 8%, or 13 subscribers, consider they aren’t required to comply due to their business models and the nature of their interactions with consumers.

“The committee will continue to engage with these code subscribers to better understand their business models and determine whether they are in breach of their code obligations,” the report says. The committee will also look to publish additional guidance.

Areas where breaches have been reported since the obligations started include not having measures in place to help people with language barriers.

One code subscriber uncovered a significant breach in a post-implementation review, finding letters had been sent to consumers in 50 instances without information about financial hardship processes and support.

The CGC says it continues to see concerning conduct around the recovery of money from uninsured consumers who are experiencing hardship, and insurers should ensure code standards are followed.

Apart from the code, the uninsured consumers have limited protections as their circumstances are outside the Australian Financial Complaints Authority jurisdiction.

“The committee therefore urges subscribers to remind collection agents and solicitors acting on their behalf of their obligations to comply with Parts 9 and 10 of the 2020 code when recovering debts from people experiencing vulnerabilities,” it says.

The report also encourages firms to frequently test and review their vulnerability and financial hardship processes to ensure they are supporting the outcomes intended.