The General Insurance Code Governance Committee has defended its decision to impose a maximum $100,000 penalty for significant breaches without naming the sanctioned business.

Consumer groups, brokers and other industry participants have criticised the decision not to name the insurer for code of practice breaches related to customer claims and complaints.

But the committee says the decision recognises the insurer’s model response and encourages others to respond as comprehensively and effectively when identifying, reporting and addressing breaches. 

“The [committee] recognises that naming an insurer is the strongest sanction, but it is not always the most appropriate,” a spokesperson told insuranceNEWS.com.au.

“In this case, while the insurer’s failures had serious consequences for customers, its proactive response was a key factor in the decision to not name it.”

The breaches affected 35 customers, including 22 hit by severe weather events declared catastrophes by the Insurance Council of Australia. One customer had to make 12 complaints before their issues were addressed.

The insurer has paid $1.2 million in compensation, has completed repairs and claims settling, and has conducted a “comprehensive review” to address systemic claims handling process issues.

The Australian Consumers Insurance Lobby has written to the code committee urging it to reconsider its approach and requesting transparency.

Chair Tyrone Shandiman says a “proactive and effective” response from an insurer cannot justify keeping its identity confidential.

Consumers and stakeholders deserve to know which business has breached its obligations, and limiting transparency only deepens scepticism when trust in the sector remains fragile, he says.

“Financial penalties alone are insufficient to drive meaningful change in insurer behaviour,” he writes in the letter. “Public accountability and the reputational consequences of misconduct are far more effective deterrents.

“Failing to name the insurer also raises concerns about the perception of regulatory independence. It suggests that code breaches can be resolved quietly, limiting public accountability and reinforcing fears that industry relationships are being prioritised over consumer interests.”

The Financial Rights Legal Centre and the Consumer Action Law Centre have also said insurers breaching the code should be named when sanctions are imposed.

“As a deterrent and public accountability measure, it would be a lot more effective to name the company, even more so when the harms are significant and vulnerable customers are impacted by the insurer’s conduct,” Consumer Action Law Centre CEO Stephanie Tonkin told insuranceNEWS.com.au.

The financial sanction is only the second imposed by the code government committee, which named the insurer when imposing a previous $50,000 penalty.

Paul Muir – a compliance specialist to the insurance industry who recently sat on the three-member panel reviewing the code of practice – supports the decision not to name the company.

In a LinkedIn post, he says “naming and shaming” can result in reputational and financial damage to the insurer and an increase in customer abuse towards contact centre and consumer-facing staff.

The case emphasises the importance of post-breach conduct, Mr Muir says. 

See Analysis.