The Financial Services Council’s Life Insurance Code of Practice has been praised for its potential to improve the consumer experience, but the FSC’s 2017 Life Insurance Conference has heard that there is room for improvement and it is too soon to submit the code to the Australian Securities and Investments Commission for approval.
ASIC deputy chair Peter Kell, speaking in a panel discussion at the conference titled ‘FSC Life Insurance Code: Will self-regulation be enough for the consumer?’, said industry-developed codes can play an important role in improving consumer confidence and helping consumers get a better deal.
“I want to commend the industry and the FSC for the development of the code,” Kell said. “Frankly, it was a bit overdue to have a code that helped deal with some of the issues and helped set out industry standards in this sector. This is the first version. If you look at some other codes, they’re up to versions five, six, seven or eight. They are supposed to be living documents, and we look forward to working with the industry further to enhance the code.”
Panellist Claire Machin, special counsel for Herbert Smith Freehills, said the immediate focus should be on getting the code “implemented, socialised with consumers [and] reviewed”.
“We’ve got this code on the road now and we’re really testing out how it works,” Machin said. “It would be premature to go racing down the pathway of ASIC registration in the short term. But I think it’s something that should remain on the agenda and be considered. There aren’t other codes…that have been registered with ASIC.
“It’s the first iteration of the code. It’s clearly a process and a journey that has to be followed, but it’s one that has involved significant investment and it’s prescribing a standard of best practice against a backdrop of intense scrutiny and focus on the life industry.”
Machin said the code would succeed or fail based on how well FSC members implement its provisions, and “the robustness of the process of monitoring compliance and enforcement of the code and sanctions for breaches”.
“The success of the code is within our hands,” she said.
Panellist Alexandra Kelly, a principal solicitor with the Financial Rights Legal Centre, said the current version of the code is an improvement over earlier ones.
“We weren’t particularly satisfied on where the code was up to,” Kelly said. “We now have a code; it’s about to be operational. Are we 100 per cent happy with where it is right now? No, I think there’s always room for improvement. There are still areas where consumers will expect more. But the proof ultimately will be once it’s in operation and how the insurers effect the provisions in the code.
“The proof ultimately will be if there’s over-reliance on the ‘exceptional circumstances’ in [claims-paying] timeframes and delay. Delay in respect of insurance claims is probably the number one call that we get to our service. Consumers ring us saying, ‘I haven’t heard from my insurer, I don’t know where it’s up to, I don’t know if it’s with me and I have to provide documents or whether the insurer is deliberately trying to drag it on so I withdraw my claim and I’m forced to go back to work.’
“I’m hopeful for the code. I don’t think it, in itself, will be the panacea for all the concerns consumers have. I think there must [also] be a focus on improving the relationship with consumers and being much clearer on what you’re selling and who you are selling it to – that might not be addressed by a code.”
Kelly continued: “From a PR point of view, consumers have an expectation that if you’re going to self-regulate, you’re going to do your absolute best to self-regulate; you’re not going to just come in with a wishy-washy, half-arsed effort.”
She said the ultimate test would be whether the Financial Rights Legal Centre receives fewer calls concerning life insurance.
ASIC’s Kell said code approval is entirely voluntary, although there are some potential benefits from going through the ASIC approval process.
“You need to decide, ultimately, if [ASIC approval is] of benefit or not. But the arguments that have been made, not necessarily by ASIC, are that it gives a stronger message around the standards set out in the code. It gives that sort of third-party view that the code is robust and rigorous.
“Ultimately the question is, will that help to build the strength of the code, will it help to give it additional credibility? If so, we’re happy at ASIC to have a conversation around [strengthening the code and giving it credibility]. There are different ways of doing it, depending on which code you might be talking about. We have to be flexible, depending on the sector and what the code is trying to achieve.”
Last year, ASIC approved the Financial Planning Association’s Professional Ongoing Fees Code, which enables members to fulfil legislated opt-in requirements by complying with the FPA code rather than the letter of the law.
“A key part of ASIC’s approval of any of these sorts of mechanisms is that we would require the body putting forward the code to undertake extensive consultation with its own industry, consumer associations and other relevant stakeholders,” Kell said. “That’s really going to draw out the issues…I think it stands this code in good stead that there has already been extensive consultation. That’s a positive.”
The ASIC code approval process is set out in regulatory guide RG 183, Approval of Financial Services Sector Codes of Conduct.
