Banking Royal Commissioner Kenneth Hayne’s recommendation that insurance codes of practice are subjected to greater enforceability could well extend to other industry codes, and the Fold Legal has warned that the Australian Securities and Investments Commission (ASIC) would likely require certain code provisions were strengthened before it gave its approval to them.
In addition to the general insurance code of practice, Hayne also recommended that the life and superannuation insurance codes go before ASIC for approval and to determine which provisions would be legally enforceable, suggesting a deadline of June 2021 to do so. While financial services industries could apply to ASIC to approve codes, just two of the 12 codes currently in the sector had been accepted.
And the general insurance code, at least, would likely need significant strengthening before it would be approved by the regulator, according to a blog by the Fold Legal.
Provisions regarding code governance, compliance, monitoring and sanctions would need to be “comprehensively strengthened and addressed” before ASIC would approve any industry code, the blog said, as well as prior stakeholder engagement and adequate provisions for dispute resolution, remedies and sanctions.
Licensees would also need to better track their compliance with the code, especially should aspects become legal, if they wanted to ensure they didn’t breach its provisions.
“It is clear licensees will require much more stringent oversight of code compliance to be alerted where they or their service providers breach the code to prevent systemic failures and to manage their licence conditions,” the Fold Legal’s solicitor director, Charmian Holmes, said.
ASIC had also already previously said that any code it approved must be administered and enforced by an independent body, and also include appropriate sanctions. It had additionally said that it would require consumers have access to internal and external dispute resolution processes for breaches resulting in direct financial loss, and the ability to complain to the independent body about any other code breach.