The Insurance Council of Australia (ICA) board has approved its new General Insurance Code of Practice after an extensive review.

ICA says the code has been “comprehensively updated and rewritten” to address consumer concerns and Hayne royal commission recommendations.

It includes a renewed focus on vulnerable consumers and a $100,000 “deterrent” for significant breaches. Australian Securities and Investments Commission (ASIC) approval will be sought.

Participants will start transitioning to the new code from January 1, with all signatory companies to be compliant within 12 months.

They will also be required to introduce and implement a publicly available policy to support customers affected by family violence by July 1 next year.

“The new code provides a significant improvement to consumer outcomes in their dealings with insurers, their distributors and their service providers,” retiring ICA President Richard Enthoven said.

“We now have provisions for customers experiencing vulnerability, including a requirement for signatories to have a policy to support people affected by family violence and provisions for customers who are experiencing mental health conditions.

“The insurance industry has enhanced its financial hardship provisions. The code also provides enhanced sanction powers to the independent Code Governance Committee for breaches of the code, and includes a community benefit payment by insurers that commit significant breaches.”

Consumer groups have broadly welcomed the changes.

Financial Rights Legal Centre Policy and Advocacy Officer Drew MacRae told insuranceNEWS.com.au the code tackles most of the concerns it has aired.

“The code has taken a pretty big and much-needed leap forward,” he said.

“Our key outstanding concern is whether it is enforceable. That might get dealt with when they seek ASIC approval.”

Key changes to the General Insurance Code of Practice

Plain English: A comprehensive plain-English rewrite aims to ensure an “easy-to-read and accessible document”.

Vulnerability: The revised code includes a new section and specific provisions for customers experiencing vulnerability. This includes the requirement for firms to have a policy to support customers experiencing family violence in place by July 1, 2020, a requirement that appropriate employees are trained to understand if a customer may be vulnerable and specific provisions regarding mental health.

Enhanced financial hardship provisions: Financial hardship provisions have been strengthened and include requirements for employees and agents involved in debt collection to be trained on the financial hardship requirements of the code.

Enhanced sanction powers for the Code Governance Committee: The revised code has been amended to extend the CGC’s ability to sanction in the event of a breach. The code has also streamlined the process the CGC needs to undertake before imposing a breach.

Community benefit payment: The CGC will be able to require an insurer that has committed a significant breach to pay a community benefit payment. The payment is up to a maximum of $100,000 and will be determined in accordance with the insurer’s gross underwritten premium and number of customers.

Cash settlements and scope of works: Subscribers will need to provide consumers with information on cash settlements so that they are better informed. A provision for scope of works similarly aims to help consumers understand this process.

Investigation standards: Mandatory standards for claims investigators have been introduced. The standards include timeframes for updating a customer on the investigation process, requirements regarding requests for information and requirements as to how the investigation interview should be conducted.