Life insurance code of practice needs bite

The life insurance code of practice needs to have bite and substance if it is to succeed, the Australian Securities and Investment Commission's (ASIC) deputy chair believes.

Speaking at a panel at the Financial Services Council (FSC) life insurance conference on Wednesday, ASIC's deputy chair, Peter Kell said the key point with self-regulation and the code of practice was that if it did not have substance stakeholders would see through it fairly quickly if there were breaches.

"It also should not simply repeat what the law already requires. Otherwise you have to question ‘what is the point of the code'," Kell said.

"I'm sure many of you remember there once was a life insurance code years and years ago. It was imposed on the industry and it was not effective, it didn't have commitment underpinning it and you certainly don't want it this time round. You need to get the consultations right."

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Also speaking at the panel, Australian Prudential Regulation Authority member, Geoff Summerhayes, said getting the code right was important as society expected a higher standard of the financial services sector.

"If there are issues in the sector we need to put them on the code. Otherwise we'll be stuck in the cycle of having to use regulation as a critical response if society demands change. We are currently in this cycle," Summerhayes said.

"The best way to avoid the cycle is to self-regulate at a higher level."