October 11, 2016
The Financial Services Council (FSC) has launched its Life Insurance Code of Practice stressing its emphasis has been on consumer protections.
FSC Chief Executive, Sally Loane said the Code will become mandatory for all FSC Life Insurer members from 1 July 2017 and had been developed ‘first and foremost for consumers’ to lift insurer practices and obligations to meet consumer needs and expectations.
Loane said the FSC was aware of the need to deal with the role of financial advisers in the life insurance process and described their role as ‘incredibly important’ but added that the Code, which is in its first iteration, was for consumers.
“The relationship between insurers and financial advisers is an important but different one, and we are committed to working with the peak adviser organisations to address mutual obligations,” Loane stated, adding the Code would work in conjunction with the pending Life Insurance Framework legislation to tackle issues around inappropriate remuneration.
The Financial Planning Association and the Association of Financial Advisers had called for greater adviser consideration in the Code as part of their submissions to the FSC when the latter was seeking industry input on a draft of the Code in August this year.
“…advisers will have a set of standards to which they can, on behalf of their customers, hold insurers accountable…”
Speaking at the launch, industry expert and former Australian Prudential Regulatory Authority member John Trowbridge said the code would bring consumers closer to insurers but would not lessen the role of advisers.
“I think it will enhance the role of the adviser, because now advisers will have a set of standards to which they can, on behalf of their customers, hold insurers accountable,” Trowbridge said.
“Equally, if consumers are unhappy with what is going and their advisers does not appear to be helping this gives them the means to go directly to the insurer. There is a reinforcing and cross accountability between adviser, customer and insurer,” he added.
The FSC also stated it was developing standard definitions for trauma insurance (See: Standard Trauma Definitions Announced) and that compliance with the Code would be enforced by an independent committee of three people – the Life Code Compliance Committee – selected by the Financial Ombudsman Service.
Members of the committee had not yet been chosen but Loane stated it would include a consumer advocate and the Committee would have the power to ensure member compliance with the Code. The FSC stated it may seek to boost the level of enforcement of the Code and is considering making an application for ASIC approval of the second iteration of the Code.