The Insurance Council of Australia (ICA) has cautioned against regulatory changes that may weaken the industry’s ownership of the General Insurance Code of Practice.

“Industry participants need to have ownership over the content of a code to ensure that the standards are practical and capable of implementation and adequately address consumer issues,” ICA says in a submission to Treasury.

“The code is a living document and ICA intends for it to be flexible to address community and customer expectations over time. ICA does not support changes that may dilute industry ownership and responsibility for developing effective and efficient self-regulation.”

Treasury is reviewing the Australian Securities and Investments Commission (ASIC) enforcement regime and is consulting on related areas, including industry codes in the financial sector.

ICA shares a Treasury taskforce’s view that the content of codes should not be prescribed by law, but it disagrees that ASIC should require that a code be formulated by an incorporated and independent body.

The council says the monitoring and enforcement of a code “must occur at arm’s length through an independent body”.

“It is the ICA’s position that an industry must remain responsible for the policy development of a code, in order for the self-regulatory model to succeed.”

However, ICA says it is “in principle” supportive of enabling ASIC to refuse a licence application or take licensing action against financial service licensees if the regulator is not satisfied controllers are fit and proper.

“We submit that, for compliance certainty, the criteria for what constitutes (or does not constitute) ‘fit and proper’ needs to be unambiguous. This could be achieved through an objective test explicitly incorporated into the legislation or regulations.”

ICA also supports making ASIC’s search warrant powers consistent across the legislation it administers, but cautions that broadening the regulator’s powers requires careful consideration.

“This is because of possible adverse consequences for… licensees both directly in terms of their legal situation and indirectly through their obligation to fund ASIC supervisory activities.

“It is important that ASIC’s powers strike the appropriate balance between providing effective investigative tools for ASIC to fulfil its statutory functions and the right of licensees to conduct their business free from disruptive intrusions.”