Mr Whelan says the add-on experience shows that self-regulation has limitations, but the industry is under no illusion it needs to take a more rigorous approach.

Ms Orr suggests that general insurance faces less "black letter" regulation compared to other financial products.

"We have always had the view the industry is heavily regulated," Mr Whelan says, disagreeing with the proposition and noting strong oversight from ASIC and APRA in particular.

Mr Whelan says all regulation has limitations and a co-regulatory approach between industry and other bodies works best.

The ICA also faces criticism over code failures in monitoring distributors.

Mr Whelan says the new code clarifies that third parties selling products are subject to the standards of the code, although previously "it was open to the industry to be able to apply those provisions".

Ms Orr questions why a new code will make a difference, if the previous code had been ignored in the case of add-on sales.

"I think it has been a salutory lesson for the industry," he says. "Clearly there have been failures, and there is no excuse for these sorts of failures."

The ICA is reinforcing and strengthening provisions to build higher levels of service and more accountability, he says.