A parliamentary report into the life insurance industry has suggested that industry codes are toothless, and reinforced the urgent need for their reform to properly hold insurers to account.
Principal of Maurice Blackburn Lawyers, Josh Mennen, said the report demonstrated that current industry codes of conduct had fallen short in improving standards and protecting customers, and regulatory oversight and enforceability was necessary.
Mennen said industry codes needed to be approved and registered with the Australian Securities and Investments Commission (ASIC), mandatory, contractually enforceable and have 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 have already seen a widespread flouting of code time limits by life insurers, with over 700 breaches reported after just six months,” said Mennen.
Mennen also expressed concerns about the lack of transparency and anti-consumer practices in cross-selling financial products, and welcomed the Committee’s call for greater scrutiny around affiliated and 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,” he said.
He cautioned the Committee’s recommendation to make opting out of insurance easier to ensure that members were not disadvantaged, and that any campaigns to help members consolidate their super were not used to “herd customers’ retirement savings into bank owned super funds which are not in their best interest”.
