The general insurance industry’s revamped code of practice came into effect last week, with subscribers facing harsher sanctions including penalties of up to $100,000 if they commit significant breaches.

Under changes to the General Insurance Code of Practice, its independent governance committee has the power to impose additional sanctions for significant breaches. These include requiring a subscriber to the code to compensate customers for financial loss or damage suffered.

The committee will report significant breaches or serious misconduct to the corporate regulator and its decisions are binding.

Other enhancements aimed at helping vulnerable customers were introduced a year ago, with implementation for the rest of the code pushed back until this year because of the pandemic disruption.

The new code “sets clear obligations for insurers with independent enforcement through the Code Governance Committee, who can impose tougher sanctions for breaches”, Insurance Council of Australia CEO Andrew Hall said.

“It underscores the industry’s commitment to openness, fairness and honesty in all dealings with customers.

“The new code includes a range of customer-centric provisions, including stronger protections for customers in areas such as cost transparency, support for those experiencing vulnerability and financial hardship and a streamlined complaints process.”

National Insurance Brokers Association (NIBA) CEO Dallas Booth says the revised code sets a new benchmark commitment to policyholders by insurers and their representatives.

“There are a number of significant changes, particularly in relation to vulnerable customers and customers in financial distress,” Mr Booth said. “Insurance brokers acting on behalf of insurers will adopt and follow the new code requirements.

“In addition, NIBA will ensure the new Insurance Brokers Code of Practice will be consistent with the insurers’ code when [the brokers’ code] is finalised later this year”.

See ANALYSIS.