The General Insurance Code Governance Committee is concerned that making some parts of the code of practice legally enforceable will create a two-tier approach to the document.

A committee joint submission to Treasury had questioned whether having a combination of enforceable and non-enforceable provisions would be beneficial, Secretariat GM Sally Davis told a hearing.

“It would create a two-tier process whereby the non-enforceable provisions would likely not be given the same level of interest by subscribers to codes as enforceable provisions would,” she told the House of Representatives Standing Committee on Economics at an insurance hearing.

Ms Davis was standing in for Code Governance Committee Chairman Lynelle Briggs, who was unable to attend due to her commitments with the Royal Commission into Aged Care Quality and Safety.

Ms Davis says the committee contributed to a joint submission to Treasury about implementing the Hayne royal commission recommendation on enforceability, which goes to the heart of industry self-regulation.

The potential for making industry codes wholly enforceable was also considered in the submission.

Ms Davis said an enforceability regime would change the nature of the landscape.

“I think the view of the committee would be that that would effectively threaten the flexibility and the purpose of a self-regulatory code and its ability to actively create continuous improvement and meet consumer expectations in a timely manner,” she said.

The Government has developed draft legislation in response to Hayne recommendations for some life and general insurance code provisions to be made enforceable by June 30 next year.

Progress on the legislation has since been delayed due to suspensions announced as the Government and industry place priority on responding to the coronavirus pandemic.

The parliamentary committee also questioned the Insurance Council of Australia, Genworth and Cover-More as part of its ongoing inquiry into the four major banks and other financial institutions.