Insurance Code Needs to Exceed the Law

Life insurers have been urged to set their inhouse and industry codes of conduct at levels above the law to regain consumer confidence according to a solicitor with a community legal centre.

Financial Rights Legal Centre, Solicitor, Alexandra Kelly said codes of practice and conduct were vital for consumer to understand what their rights were

Speaking at the recent Financial Services Council (FSC) Life Insurance Conference in Sydney Kelly said the FSC should aiming to be far-reaching with its proposed code and not just follow regulation or replicate the law.

“Actually look at finding an area where the law is not clear and come together as an industry and state ‘this is how we will treat consumers in this way’ or ‘these are the standards we all agree consumers are entitled to’. You might not be required to do that by law but you can commit yourself to going beyond the law.”

Kelly said consumers that contacted the centre were examining all aspects of life insurance and it would be useful for them to have a code of practice that shows the life insurance industry was improving while providing an avenue of complaint if they were not getting the service to which they were entitled.

“It is not the role of a code to tell consumers what the consumer has to do…A code is you saying what you will do”

“It is not the role of a code to tell consumers what the consumer has to do. That can be provided but it should sit outside the code,” Kelly said.

“A code is you saying what you will do and if want to inform a consumer that should be to the side. If you want to increase education standards there is a role for industry to do that, but a code is not the place.”

Kelly’s comments were made on the same day that FSC, Chief Executive, Sally Loane announced the consumer protection provisions of its soon to be released Code of Practice have been strengthened further.

Kelly, who has seen drafts of the proposed FSC Code of Practice, was critical of its early development and said more work remained to be done from a consumer perspective.

“When I saw the first draft I was pretty critical because I saw that it restated the law. All consumers assumed you were already complying with the law and bringing out a code that said insurers would comply with the law was a bit of a concern, because were you not doing so before?,” Kelly said.

“With that criticism in mind, my current analysis is that if we are driving to Melbourne and Melbourne is our ‘gold standard, registered with ASIC code’ – which is what the consumer movement is looking for – then we are currently stuck in traffic in Campbelltown”.

“There is still a long way to go and any work on the code needs to be aspirational in its goals with concrete objectives. Otherwise, if there is already criticism that you cannot be trusted with a self-regulatory code, people will believe one should be imposed.”