The creation of an industry code of practice is only the first step to improving the life insurance sector with the true test being improved consumer outcomes, the FSC has been cautioned at its recent Life Insurance Conference.
The warning was given by ASIC Deputy Chair, Peter Kell and two lawyers who represent insurance claimants with each stating life insurers still had some way to go to win back the trust of consumers.
Speaking on a panel about the FSC Life Insurance Code of Practice, Kell said it had the potential to play an important role and ASIC looked forward to working with the life insurance sector to advance the Code.
Kell said the key test for the Code was how it aligned with consumer outcomes which had been an area of failure within financial services in recent years.
“The key test for a document like this is not going to be how you will adhere to clauses but that the code sets out some commitments to how you think your industry should behave,” Kell said.
“It sets out commitments to how you think consumers should be dealt with and treated. It sets out the standards you want to meet as a sector that go beyond the minimum standards of the law,” he added.
“The key issue over time is going to be are the commitments and promises in the code aligning with how things work in practice,”Kell said.
“If there is misalignment between what people are told financial services providers will do and what happens in practice, that is where self-regulatory codes break down,” he said.
Financial Rights Legal Centre Principal Solicitor, Alexandra Kelly said the presence of lawyers in the claims process was evidence that change needed to occur in that area and the proof of the Code’s success would be a decline in legal representation during claims.
“The proof will ultimately be once it is in operation and how insurers give effect to the provisions of the Code. The proof will be whether there is an over reliance on the exceptional circumstances clauses when it comes to timeframes and delays,” Kelly said.
“I think the proof will also be consumers no longer call me asking me where their claim is in the process,” Kelly added.
“The key issue over time is going to be are the commitments and promises in the code aligning with how things work in practice”
Herbert Smith Freehills Special Counsel, Claire Machin told life insurers they had to be careful and avoid seeing the Code as merely repeating the law.
“There are parts of the Code that repeat existing law and there may be temptation to say ‘if we meet the law, we meet the Code obligations’,” Machin said
“That approach is foolhardy, because the code is not law, it is a piece of self-regulation. It is a framework that is responsible to feedback and iterations and changes in consumer expectations and things that become issues in the consumer experience,” Machin added.
She also cautioned life insurers around overthinking the Code and looking at its provisions and statements, and conducting a line by line analysis on whether a company’s systems met the requirements of the code.
“At that point, it would be important to step back and look at the objectives of code and its principles and the statements of intent around what the consumer experience should be,” Machin said.
Would Mr Kell please explain to us how the FSCs Life Insurance Code of Practice could have in any way stopped AMP from announcing 30% increase in some former AXA IP level premiums, as it did last week.
Will that same FSC Code require life insurers to release new retail life insurance products based ONLY on accurate actuarial assumptions. It is now pretty clear that some years ago actuaries employed by AXA/ National Mutual either failed to calculate IP premiums accurately using good assumptions, OR the premiums, once calculated, were “modified ” by the sales team, just to remain “competitive in the market”
That Code is a JOKE – it does nothing to stop outrageous premium gouging on existing products.
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