The voluntary approach to industry self-regulation in the life insurance are not working, according to the Parliamentary Committee on Corporations and Financial Services.
The Committee’s report on the Life Insurance industry has expressed a low level of confidence in the co-regulatory approach being pursued by the Financial Services Council (FSC) via its Life Insurance Code of Conduct and the Insurance inside Superannuation Code of Conduct.
“The committee has considered the current self-regulatory approach adopted by the Financial Services Council and the Insurance in Superannuation Working Group,” the report said. “The committee is not persuaded that the current voluntary approaches to industry self-regulation put forward by the Financial Services Council and Insurance in Superannuation Working Group are sufficient to deter misconduct and address the poor practices that have become all too prevalent in the life insurance industry.”
The report said that the committee had also noted that previous self-regulatory codes in the life insurance industry had fallen into disuse.
“The committee considers that it would be unacceptable for such a situation to recur,” it said.
The report said that, in light of this, the committee was persuaded that co-regulation would have greater potential to foster best-practice in the life insurance industry and, as a consequence, help restore much-needed consumer confidence in the sector.
“In particular, the committee considers that, with respect to the life insurance industry, a co-regulatory approach must, at a minimum, deliver a code that:
- is written in plain English that regulates the conduct of life insurance companies in assessing claims;
- is mandatory for all industry participants;
- is registered with ASIC;
- is enforceable in order to create accountability; and
- provides genuine remedies for its breach, including financial remedies,
thereby creating an incentive for compliance.
