Maurice Blackburn Lawyers have welcomed a parliamentary report released today into the life insurance industry that reinforces the urgent need for industry codes of conduct to have teeth – namely regulatory oversight and enforceability – to properly hold insurers to account.
Maurice Blackburn Principal Josh Mennen said today’s report outlined a series of recommendations based on a comprehensive and reasoned inquiry, and that it was evident from the report that current industry codes of conduct had so far fallen short in improving standards and protecting consumers.
“Today’s report reinforces a key concern that we have advocated for a long time – that the industry has been unable to effectively regulate itself with its own codes of practice and that any codes must have teeth, including being approved by and registered with ASIC,” Mr Mennen said.
“The report also acknowledges that codes of practice must be mandatory, which is not the case currently for the recently designed Insurance in Superannuation Code of Practice, and these codes must be contractually enforceable with appropriate sanctions imposed for breaches.
“The industry insists it can regulate and enforce itself with its own codes that are voluntary, non-binding and non-enforceable, but it is obvious that position is completely untenable – these codes are barely in their inception, yet already we have seen widespread flouting of code time limits by life insurers, with over 700 breaches reported after just six months.
“Today’s report also reinforces our concerns about the inherent conflicts in the cross-selling of financial products, namely that too often such practices lack transparency and are anti-consumer.
“We welcome the Committee’s call today for greater scrutiny around affiliated and non-affiliated products, including that affiliations in selling products must be disclosed in recommending products and in ensuring consumers have access to comparable non-affiliated products.
“This is a key issue we see where consumers are pushed to insurance products which advisors are incentivised to promote that are not in their best interests, and we welcome that the Committee have recommended this is a problem requiring urgent attention.
“We also welcome the Committee’s acknowledgement of the importance of automatic insurance in superannuation as a safety net against underinsurance.
“However we urge caution around recommendations to make opting out of insurance easier and observations in relation to duplicate insurance, which in many instances has transformed disabled claimants’ lives, to ensure that members are not disadvantaged.
“It’s also crucial that any campaigns to ‘help’ members consolidate their super are not used as cover to herd customers’ retirement savings into bank owned super funds which are not in their best interests.
“We look forward to seeing more detail on the recommended removal of the exemption for life insurance from the unfair contract and other consumer protections provided under the Australian Consumer Law.
“Finally, we also welcome the Committee’s recommendations seeking up-to-date, standardised and simple definitions in claims handling, and importantly the call for defined timeframes for dealing with a claims as well as recommending limits on the maximum amount of times consumers can be asked to undertake medical examinations.
“These reforms and the recommendation of better standards through codes of conduct with respect to claims for mental illnesses are very welcome,” he said.