The Australian Consumers Insurance Lobby has held talks with the financial services regulator about the use of expert reports, as the parliamentary floods inquiry calls for greater oversight.

The inquiry final report recommends the Australian Securities and Investments Commission produce regulatory guidance on hydrology and expert reports “consistent with” proposals put forward by the independent review of the general insurance code of practice.

“When we spoke to ASIC, we made it clear the proposed standards simply do not go far enough to address the significant consumer issues related to expert reports,” Consumers Insurance Lobby chairman Tyrone Shandiman said. “The current proposals guide only how insurers should use expert reports but don’t deal with the source of the problem – the expert reports themselves.”

Mr Shandiman says there have been too many cases in which a single sentence or even word in a report becomes the basis for an unfair denial, and enhanced standards should be imposed directly on experts under the code section on standards for service suppliers.

“By including greater requirements in part five of the code, the code governance committee should have the authority to impose sanctions on insurers that consistently work with experts who produce erroneous or biased reports aimed at denying coverage,” he told insuranceNEWS.com.au.

The Insurance Council of Australia has previously rejected ACIL’s concerns. It says a new best practice standard specifies the sort of evidence that should and should not be included. It instructs experts to disregard irrelevant or incorrect information, rely only on facts or assumptions that have been clearly substantiated, and provide clear and cogent reasoning to support any opinion. 

The standard also says insurers should ensure reports provide details of an expert’s qualifications and include a statement of objectivity.

The code of practice independent review recommendations include mandating compliance with the best practice standard.

Mr Shandiman says current proposals leave open “plausible deniability” by insurers in cases where experts do the wrong thing, and there is a gap in the code and best practice guide.

“Insurers have some responsibility and they have a lot of control over the experts because they are the ones paying for their service,” he said.

ICA has said it will seek ASIC approval for the revised code of practice, which is due to be submitted next year.

“It would be detrimental for consumers if ASIC endorsed a code that does not properly address the well-publicised issues surrounding the expert reports,” Mr Shandiman said.