More regulatory oversight is needed to restore public trust and deter poor practices in the life insurance industry, according to the Parliamentary Joint Committee on Corporations and Financial Services.

The committee’s final report says voluntary codes from the Financial Services Council (FSC) and Insurance in Superannuation Working Group (ISWG) do not go far enough.

“The committee is not persuaded that the current voluntary approaches… are sufficient to deter misconduct and address the poor practices that have become all too prevalent in the life insurance industry,” the report says.

“The committee also notes previous self-regulatory codes in the life insurance industry fell into disuse. The committee considers it would be unacceptable for such a situation to recur.”

It says the Government should consider adopting the co-regulatory approach proposed by the Australian Securities and Investments Commission (ASIC) Enforcement Review Taskforce.

This would give the code compliance committees power to determine if breaches have occurred and enable the Australian Financial Complaints Authority to enforce compliance through determinations.

“The committee is persuaded that co-regulation would have greater potential to foster best practice in the life insurance industry and, as a consequence, help restore much-needed consumer confidence in the sector,” the report says.

The report says ASIC should be given power to undertake enforcement action in relation to systemic or systematic code breaches in the industry and wider financial services sector.

The committee says the FSC’s Life Insurance Code of Practice should apply to financial advisers or planners selling or advising on products.

“This is another in a very long list of exemptions from adequate consumer protections that the life insurance industry currently exploits,” the report says. “The committee considers the exemption to be a serious flaw, particularly given the poor conduct of some advisers identified in several recent inquiries and reviews.”

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