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
2
of 10
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
.
????????????????????????????????????????????????????????????????????????
se.
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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of 10
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.
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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.
4
of 10
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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
:
?
H
igh standards of service
?
B
etter and more informed relations with customers
?
F
air and effective dispute resolution
5
of 10
?
C
ontinuous improvement
of the industry through education and training
?
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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of 10
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
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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.
???????????????
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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of 10
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.
8
of 10
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
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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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of 10
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:
?
T
hose experiencing family violence
?
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.
?
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
?
Insurers are also required to have
a family violence policy in place by
July
1
.
10
of 10
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.
