FSC faces questioning on enforceability of Code of Practice

The Royal Commission has raised the issue of the enforceability of the life insurance code of practice, with Financial Services Council chief executive, Sally Loane, today facing tough questions on whether the code is merely “aspirational”.

Loane said that the FSC did not have a “fully formed view” on whether the terms of its life insurance code should be incorporated into legally enforceable life insurance contracts, admitting that the Code at this point was “aspirational”.

When asked by an incredulous Senior Counsel assisting the Commission, Rowena Orr QC, what the use of “aspirational statements in a document like this were”, Loane spoke of the “granularity” of the Code.

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Loane nonetheless remained confident that the FSC Code of Practice for the life insurance industry was enforceable, saying that insurers were liable through the Life Code Compliance Committee administered through the Financial Ombudsman Service.

She later had to admit that the Committee was yet to apply any sanctions to companies under the Code.

Despite the general insurance industry having a code of practice in place since the mid-1990s, the life insurance industry did not until two decades later, and even then, the change only came about because of strong recommendations in the Towbridge Report.

When asked by Orr why the life/risk industry had not had a Code earlier, Loane was unable to give a reason. She did however say that it “quite possibly” should have, before, after further questioning by Orr, admitting that it actually should have.

Loane maintained however, that the industry should retain the carve-outs it currently enjoys from the Corporations Act’s section 192, which provided for honest, efficient and fair action from companies, and from having a statutory obligation imposed to ensure that staff are adequately trained and competent.

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And there we have it. The summary of the FSC. A useless code, breached everyday by its members with no accountability.
Lets just see the FSC for what they are. A cartel lobby group all about profit. Shut them down.

The FSC fought tooth and nail to have a Level commission only option for Risk Insurance and supported the proposals of the Trowbridge Report.
The FSC receive membership fees from their member insurance companies and so are answerable to them.
If these FSC members wanted to develop and drive their direct insurance models as profit driven businesses then the FSC would support their members...simple.
The FSC wanted to entirely remove the Hybrid commission model, even though there was no evidence from the ASIC Report 413 that this was an issue.
There was very accurate speculation that during the Life Insurance and Advice Working Group process the Terms of Reference were breached and that the FSC may have been providing information to some members without the knowledge of other members of the working group.
The FSC attempted on many occasions to meet with Kelly O'Dwyer in an attempt to influence the carve out and have direct insurance quarantined from the same regulations as advisers.
What the FSC wanted to do was to place so much pressure on the remuneration paid to advisers and their businesses to effectively destroy them and to allow the direct insurance model to flourish.
Quoting directly from the FSC's submission to Trowbridge Review of Retail Life Insurance dated 5th Feb, 2015:
" Ensuring Australian consumers have access to quality life insurance advice and life insurance frameworks which place consumer interests first is imperative ".
Well Sally.........the direct Life Insurance market is sure living up to the standards outlined !!

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