The House of Representatives inquiry into the insurance industry’s response to disasters has questioned the reasoning behind insurers being exempted from complying with the industry’s code of practice during times of natural disasters.

Inquiry member Shayne Neumann says the exclusion “makes a mockery” out of the code, especially as insurers are in the business of dealing with catastrophic events.

But Greg Kirk, Senior Executive Leader of Deposit Takers Credit and Insurance at the Australian Securities and Investments Commission, disagreed.

He told the inquiry there is still a responsibility for insurers to deal with claims as quickly and efficiently as possible. 

“I certainly would not agree that it makes it a nonsense,” Mr Kirk said.

He says for insurance companies to comply with these standards during times of natural disaster would require teams of trained and skilled people to be on call at all times.

“This would involve significant cost and would potentially increase the cost of insurance to everyone,” he said.

Mr Kirk would also not be drawn on speculation over the need for separate regulatory frameworks to allow for certain claims timeframes to be implemented during periods of natural disaster. 

“Whether you have that longer timeframe for a natural disaster or whether you just allow general flexibility and rely on the goodwill of the industry, their desire to do the right thing and the public pressure is generally a matter for government, at the end of the day,” he said.

The panel also questioned Mr Kirk over the need for the Financial Ombudsman Service (FOS) to openly advertise its existence to policyholders rather than leaving it up to insurers to advise clients of the process.

He said insurers should be given the chance to deal with claims issues before the customer is encouraged to go elsewhere for redress.