House of Representatives Economic Committee
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Opening Statement:
Rob Whelan ,
CEO ,
Insurance Council of Australia
Hearing date: Wednesday
June 3 , 2020
(v ia video conference )
E&OE
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Thank you for the opportunity to give evidence and provide this opening statement to the Committee .
The Insurance Council of Australia is the representative body of the general insurance industry . It does not represent the life insurance or health insurance sectors.
?????????????????????????????????????????????????????????????? - regulation , the General Insurance Code of Practice
and recent reports of the independent Code Governance Committee .
I am supported today by Fiona Cameron, who heads the consumer outcomes policy directorate ??????????????????????????????????????????????????????? - regulation.
Karl Sullivan, who heads the
risk and operations directorate , is also present .
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I will defer to them on areas of specialist knowledge.
As background, insurers provide 41.5 million small business and household insurance policies to customers each year , and pay more than $169.4 million in claims every working day.
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The Code requires subscribers to co - operate with the Insurance Council on industry co - ordination arrangements for Insurance Council - declared catastrophes.
In that context, I am pleased to say that insurers have made impressive progress in helping customer s affected by natural disasters over spring and summer .
Insurers have so far received more than 38,000 claims totalling $2.32 billion from the bushfires.
Almost two - thirds of 9086
residential building claims and more than 80 per cent of 14,033 contents c laims have been closed . This means repairs or rebuilds have been completed, items replaced, or payments provided.
??????????????????????????????????????????????????????????????????????????????? the total claims bill now more than $5.19 billion.
Close to h alf of all disaster season claims are now closed, even though h undreds of new claims are being lodged every week.
The se
strong closure rates show i nsurers have been focusing on helping families and small businesses ?
and working t o the principles of the
in ????????
Code
of Practice.
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??????????????????????????????????????????????????????????? AFCA Lead Ombudsman John Price said AFCA hadn't detected any systemic issues with the insurance industry .
He noted insurance companies had become conciliatory in their approach and more
proactive since the 2009 Black Saturday bushfires.
I a m pleased to
now provide information to this committee on self - regulation and the General Insurance Code of Practice ,
first introduced in 1994 .
About the Code :
T he I nsurance Council ???????
S elf - regulation plays an important role within the broader regulatory landscape.
The Code is ????????????????????????????????? self - regulatory commitment to customers.
On the whole, Code standards go
beyond the minimum requirements of the law
and drive positive consumer outcomes.
It s objectives
are :
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H igh standards of service
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B etter and more informed relations with customers
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F air and effective dispute resolution
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C ontinuous improvement of the industry through education and training
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An d to maintain and promote trust and confidence in the industry.
The Code
plays an important role in raising customer service standards and meeting community
expectations .
These
standards cover the entire customer service relationship ,
including
sales and distribution, renewals and cancellations, making a claim, and complaints handling .
The Code covers most general insurance products , notably c a r, home building, home contents an d travel.
The Insurance Council own s , develop s
and
?
together with member
companies ?
promote s
the Code . It is a living document that has been periodically
reviewed
and improved
since its inception 25 years ago.
The
latest
review is one of the most extensive in its history. It was conducted by the Insurance Council
with independent oversight.
This led to the development of the new Code, which has been significantly revised and improved.
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The new Code
is prefaced by industry - develo ped principles that underpin and shape the way the industry behaves, treats customers and approaches making decisions.
T he C ode Governance Committee ? s
role
???????????????????????????????????????????????????????????????????????? the Insurance Council.
It monitors and enforces the Code, reports on compliance, and has broad scope to consider breaches and investigate industry issues.
It
provid es
recommendations on
the Code, and issu es industry g uidance on how Code compliance can be improved.
The Committee conducts O wn M otion inquiries
that can result in recommendations for industry
or Code
improvement.
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first O wn M otion
I nquiry , which looked at claim s
investigation an d outsourced services ,
is
reflected in the new
Code.
CGC report s
You will be aware that the Committee recently released its 2018 - 19 A nnual R epor t .
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The committee acknowledges that the increase in insurer breach es
can be
viewed as evidence that
Code subscribers have improved their cultures so they are more open to reporting breac hes, are taking their monitoring more seriously and have more robust and effective breach mechanisms in place.
They are learning from these breaches and are putting in measures to prevent reoccurrences.
The Insurance Council is pleased
ongoing improvements
to Code governance frameworks
will help identify issues and improve consumer outcomes through rectification or compensation measures .
Th e Living the Code
report was released on Monday. It makes
recommendations about how insurers can continue to develop a culture of compliance and breach reporting for demonstrated robust compliance.
These reports are an educative tool to assist subscribers to continue to improve compliance
frameworks .
ICA Code Review
The ICA started its latest Code review process before t he Hayne Royal Commission
was announced.
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We extended the process to ensure we could take any recommendations into account.
This was a prudent decision .
T he new Code now empowers the Code Governance Committee to impose sanctions on Code subscribers for breaches or significant breaches.
It includes a community benefit payment of up to $100,000 for a Significant Breach.
This is a sanction unique to financia l services c odes . It originated from the ???????????????????????????????
The Insurance Council is also working with Treasury on enforceable Code provisions, which was also a Hayne recommendation.
The ICA intends to apply for ASIC approval of the Code once
the regulatory framework for enforceable provisions is in place, and ASIC has updated its Regulatory Guide 183.
COVID - 19 and
the new Code
When the Code transition was launched at the start of this year, we expected it would be business as usual .
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This is n o longer the case. I nsurers wish to focus on helping those customers most in need, while also having sufficient time to implement the new Code.
The new Code addresses societal issues of vulnerability and provides greater support for:
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T hose experiencing family violence
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C onsumers experiencing vulnerability ,
including financial distress and hardship, mental health , physical health, age, language barriers, literacy and cultural barriers, first nations status and remote location
The intern al complaints process
is also being streamlined
following stakeholder feedback.
Recently t he Insurance Council Board decided insurers should
direct urgent resources to customers who are facing vulnerabilities during COVID - 19.
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F rom July 1 ,
or earlier if pos sible, insurers are fast - tracking where possible, vulnerability and f inancial hardship measures intended by the new Code
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Insurers are also required to have a family violence policy in place by July
1 .
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A ll remaining Code provisions start
from July 1, 2021 , which is a six - month extension due to COVID - 19 .
This is ???????????????????????????????????????????????????????????? legislation , which has been accepted by consumer organisations .
Conclusion
S elf - regulation plays an important role within the broader re gulatory landscape .
???????????????????????????????????????????????????????????? of Practice is to continuously improve service standards and customer outcomes, meeting the changing requirements and expectations of the community.
The industry continues to demonstrate its commitment to the Code.
We
are now happy to take questions from the Committee.
