Life insurance companies will face a new avenue of sanction for any breaches of the Life Insurance Code of Conduct with the Life Code Compliance Committee (LCCC) to be given increased sanction powers.
The move is a result of the Financial Services Council’s review of the Life Insurance Code of Conduct and is also substantially in line with the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The FSC’s Life Code review documentation has declared that the LCCC’s charter will be amended in line with recommendation 4.10 of the Royal Commission “so that the LCCC may impose a sanction on a subscriber in the event of a significant breach of the Code”.
However, the FSC has specifically recommended against the compulsory naming and shaming of insurers or the imposition of greater sanctions where mental health claims are concerned.
“In respect of sanctions for treatment of persons with mental health conditions, the FSC does not agree that conduct involving a single community of vulnerable customers should have different sanctions to treatment of other customers or members of vulnerable communities,” the FSC said. “While recognising that certain members of the community are vulnerable and require extra support, the FSC does not believe that it is appropriate or equitable to create a tiered regime of sanctions.”
“The FSC does not agree that all compliance cases should be published and reported in an identified manner. Under the current Code, the LCCC is able to require publication of non-compliance as a potential sanction,” it said. “Brand reputation is extremely important to all Code subscribers and all subscribers take their obligations under the Code very seriously.”
“The LCCC will now also be empowered to impose sanctions on certain breaches rather than failure to correct a breach. Publication of compliance cases where the LCCC has determined that the subscriber has not breached the Code could cause disproportionate reputational damage. Therefore, it is appropriate that publication of non-compliance remain one of the sanctions available to the LCCC.
“The FSC believes that change to the sanctions powers strike an appropriate balance between providing customers with transparency and ensuring that subscribers are sanctioned where it is appropriate,” the document said.
The FSC agrees with the LCCC that the Code should not unnecessarily repeat obligations or clauses of the Charter.