Insurers must ensure their systems are compliant with a new industry code as “a matter of urgency” after a high number of breaches once again last year, the General Insurance Code Governance Committee says.

New committee Chairman Veronique Ingram says the stubborn persistence in breach cases is “especially disappointing” and “discouraging” after the committee has provided an “abundance of recommendations” clearly detailing how to comply.

“Even accounting for the year’s extraordinary events … it is discouraging to see consistently high breach numbers in areas of the code where the committee has previously set expectations and provided guidance for achieving compliance,” Ms Ingram says in the committee’s latest annual report.

It was “especially disappointing” to see the prevalence of significant and standard code breaches being attributed to systems-related issues, she said, as well as processes and procedures not being followed, and to human error.

She noted the committee has engaged extensively on how to identify and report code breaches and provided an “abundance of recommendations for implementing the organisational culture and corporate governance required for robust code compliance”.

“We expect all subscribers to take these recommendations on board as a matter of urgency as they transition to the new 2020 code,” Ms Ingram says.

In the year to June, the number of self-reported standard code breaches rose 5%, while the number of significant breaches reported fell 6%. The number of breaches identified by the committee jumped 42%.

According to the report, last financial year saw 32,870 breaches and a further 112 significant breaches. Almost two-thirds of all breaches were attributed to just five organisations, with a single firm responsible for almost a quarter of all the breaches reported in 2019/20.

Most significant breaches related to conducting sales processes efficiently, honestly, fairly and transparently.

Just over half of all self-reported standard breaches were of the code’s claims handling standards, many resulting from failing to meet timeframe obligations.

“Concerningly, non-compliance with the code’s principles-based standards for selling insurance and for claims handling – particularly those that require subscribers to be fair and efficient in their dealings with consumers – continues to be an issue for many,” the report says.

The number of declined claims jumped 25% while complaints from consumers jumped 20%, mainly in home, retail motor and travel. These were largely due to bushfire and hail claims, policy exclusions around COVID-19 for travel insurance claims as well as issues such as assessor access, materials delays or builders experiencing delays due to state government travel restrictions.

A new 2020 Code, replacing the 2014 code, will be fully in force by July 1.

Ms Ingram says operations, compliance frameworks and reporting capabilities should already be closely aligned to the new obligations, rewritten after the Hayne Royal Commission and granting the committee with enforceable sanction powers.

The Australian Securities and Investments Commission (ASIC) will have additional powers to take action on breaches of enforceable provisions of ASIC-approved codes.

“We are closely monitoring subscribers’ compliance,” the report says. “This has included checking whether subscribers have published their Family Violence policy on their website. We are also monitoring their compliance with … supporting customers experiencing vulnerability, and Financial hardship”.

The committee, which is also examining whether there are differences in compliance and consumer outcomes between different insurance brands, urges that insurers “ensure that their people, policies, processes, systems and governance arrangements are in place and sufficiently tested to ensure compliance with the full 2020 Code.”