FSC says draft insurance code on its way


By James Dunn

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Following more blowback on the life insurance industry’s treatment of consumers this week, the Financial Services Council (FSC) has flagged its industry code of practice for life insurers is “well underway”, having been working with its members on the draft since August 2015.

FSC chief executive Sally Loane said the council was continuing to develop and improve the code’s content.

“The code of practice is an industry first for life insurance and is being developed through extensive public consultation with industry stakeholders, consumer groups and regulators,” Loane said.

“The code will commit life insurers to strong standards of customer service and will enhance consumer protections in the key areas of underwriting and claims.”

She defended the self-regulation that had largely prevailed in the life insurance sector, saying the development of industry self-regulation was “common across financial services”, with the general insurance, banking, customer-owned banking and insurance broking industries all operating similar processes to develop their own codes of practice.

As part of the process of developing the code, she said the FSC had discussed the content with a “broad range of stakeholders”, including peak industry bodies with an interest in life insurance and consumer advocacy groups.

“Compliance [with the code] will be mandatory for the FSC’s life insurance members,” she said.

“The code will also be supported by an independent governance framework ensuring effective code compliance, which is common practice.”

She added the FSC was “looking closely at the issues that have arisen within the life insurance industry recently” and would consider them in light of the code.

The code would be discussed in greater detail at the FSC Life Insurance Conference next Wednesday and the council would also provide information about the code and its development to the Senate’s Scrutiny of Financial Advice Inquiry, she said.

However, the code in its current form has been met with scrutiny by consumer groups, with Consumer Action Law Centre senior policy officer David Leermakers telling financialobserver that when he last saw the code in consultation meetings in January, it was unimpressive.

“We couldn’t find anything in it that life insurers weren’t already required to do by law,” Leermakers said.

“There was nothing in it to suggest that the life insurance industry had a genuine willingness to change.

“If you look at the Banking Code of Practice, most consumer advocates would say that when the Australian Bankers’ Association reviews that every year, they genuinely try to improve it.

“Unless there’s been progress on the code since January, I don’t think there’s been a great effort to improve the industry’s standards.”

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