The General Insurance Code of Practice

4.63 The ALRC is of the view that it is not appropriate for the General Insurance Code of Practice (the Code), or any other industry code, to mandate the removal or extension of age-based limitations on insurance policies. However, the ALRC proposes that ways in which the Code could be amended to encourage insurers to consider the needs and circumstances of mature age workers in insurance should be examined in the current review of the Code.

4.64 The Code was developed and introduced by ICA in 1994. It applies to all general insurance products, including travel insurance and sickness and accident insurance. It does not apply to workers’ compensation or cover reinsurance. The objectives of the Code are to:

• promote better, more informed relations between insurers and their customers;

• improve consumer confidence in the industry;

• provide complaint and dispute resolution mechanisms; and

• commit insurers and other insurance professions to high standards of customer service.^[55]

4.65 The Code is binding on all signatories, including members of the ICA. The Financial Ombudsman Service (FOS) monitors compliance with the Code. Its findings are reported to the independent Code Compliance Committee, which has power to make determinations and impose sanctions.^[56] The ICA has indicated it will seek ASIC approval for the revised Code, as provided for under the Corporations Act 2001 (Cth).^[57]

4.66 The Code provides that an independent party will be appointed by the ICA to review the Code every three years. The last review occurred in 2009, however other amendments were made in early 2012 and these commenced on 1 July 2012. In July 2012 a new review of the Code commenced. The review is being conducted by Mr Ian Enright and an advisory panel. An issues paper is due to be released in September 2012 and the final report in mid-2013.^[58]

Removing age-based limitations on insurance policies

4.67 In the Issues Paper, the ALRC asked whether insurance industry codes of practice should be amended to encourage or mandate the removal or extension of age-based limitations on insurance policies.^[59]

4.68 Any such amendment was strongly opposed by those stakeholders who addressed this question, on two bases.

4.69 First, the ICA submitted that mandating the removal of age-based assessments, through whatever means,

has the potential to adversely impact the willingness to offer particular insurance or, if offered, could lead to serious consequences in relation to an insurer’s obligations under the prudential regime supervised by Australian Prudential Regulatory Authority where increased risk profiles have increased capital requirements.^[60]

4.70 Secondly, other stakeholders suggested that the Code is not an ‘appropriate tool to mandate or encourage’ the removal of age-based limitations.^[61] In addition, Suncorp highlighted the customer service nature of the Code and submitted that the ‘inclusion of product availability and affordability promises in a customer service code would be counterintuitive’.^[62]

4.71 In the ALRC’s view it is not appropriate for the Code, or any other industry code, to mandate the removal or extension of age-based limitations on insurance policies.

A more appropriate role for the Code?

4.72 The Code sets minimum standards of customer service and contains a number of specific obligations of particular relevance for mature age workers. The existing provisions already contain some scope for addressing insurance issues faced by mature age workers.

4.73 COTA raised concerns about the effectiveness of industry codes. It submitted that

consumers do not have a great deal of faith in the self regulation model as they have seen little evidence that it provides strong consumer protection. We support some external regulation and believe a framework that requires insurance companies to provide detailed and contestable evidence as to why they should have age limits would be the best approach.^[63]

4.74 The ALRC suggests that IRAG’s consideration of the matters outlined above should encompass discussion of external regulation and the need for current, accurate and accessible evidence. However, the current review also provides an opportunity to consider useful potential amendments in this area. A number of stakeholders supported this approach.^[64]

4.75 Accordingly, the ALRC proposes that in the course of the current review, the independent reviewer should consider the following areas of the Code and ways in which they may be amended to incorporate the needs and circumstances of mature age persons seeking insurance:

• training of employees and authorised representatives;^[65]

• access to information relied upon in assessing claims;^[66]

• provision of up-to-date, clear and accessible information to customers;^[67]

• complaints handling procedures;^[68] and

• any other relevant areas.

4.76 The ALRC also welcomes stakeholder feedback on possible amendments to other industry standards or codes to encourage insurers to consider the needs and circumstance of mature age persons in insurance. However, the ALRC notes concern by some stakeholders about having to comply with multiple codes as industry associations develop new codes based on the Future of Financial Advice reforms.^[69]