Insurers must ensure third-party service providers comply with code of practice obligations, the governance committee has warned, after a contractor engaged to store a customer’s household furniture lost or damaged some of the items. 

The insurer argued its third-party contractor was not technically a “service supplier” so the obligations did not apply, but the oversight committee ruled it was the insurer’s responsibility to ensure the customer’s furniture and other contents were managed in accordance with the code. 

The Code Governance Committee found the insurer breached paragraph 21 because, through the third-party contractor, it had not handled a claim in an efficient, fair or timely manner.

“The third-party contractor lost some of the customer’s contents and damaged others, which caused delays in the claim and distressed the customer,” it says. 

A compliance reminder says insurers must ensure they can report properly on any service outsourced to a third party. 

“Rather than taking a narrow interpretation that limits the application or downplays the importance of code obligations, insurers should interpret obligations broadly, keeping in mind the underlying purpose and spirit of the code,” it says. 

“All reporting systems, processes and practices must align with the expectation that code breaches attributable to third parties are recognised as breaches.”