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.
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.