Australian Insurers Adopt New Practice Code, Raising Consumer Expectations

July 25, 2005

A recently-launched new Code of Practice for the Australian insurance industry will mean general insurers will meet higher, measurable performance standards for dealing with customers, including settling claims in specific time periods and providing clearer information about policies.

Developed by the Insurance Council of Australia (ICA) in consultation with the insurance industry, and consumer and business representatives, the code covers all types of general insurance for individuals and business, but does not cover workers compensation, compulsory third party, medical indemnity and marine insurance, which all have their own set of rules under statute.

ICA President, Michael Hawker, said the code followed more than a year of extensive consultations and represented a real bonus for consumers. “With more than 41 million insurance policies in force and $55 million in claims paid each business day in Australia, the improved service standards the code promotes will have a genuine impact on policyholders,” Hawker said.

“The code is written in plain language that everyone can understand and not only sets concrete standards that customers will be able to expect of their insurer, but encourages insurers to exceed them,” he added.

The ICA leader said the industry was conscious that consumers now have higher expectations about service delivery.

The Australian Government has welcomed the industry’s move. The Parliamentary Secretary to the Treasurer, The Hon Chris Pearce MP said: “The Australian Government supports this voluntary code, and the insurance industry is to be congratulated for listening to the Australian public and taking this step to create greater transparency, improved customer service, and clearer information for policyholders.”

Hawker said the industry consulted with the Consumers’ Federation of Australia, the Australian Chamber of Commerce and Industry, the Federal Government’s Office of Small Business, the Insurance Ombudsman Service and other groups to develop the Code.

All ICA members, who represent approximately 90 percent of the market, have vowed to adopt the code, with all other general insurance industry representatives also encouraged to do so.

Insurers will be implementing the code as quickly as possible over the next 12 months. During this time the existing Code of Practice will continue in effect.

The new code requires general insurers to:
* Meet agreed timeframes for handling claims or responding to complaints. For example once all the relevant information for a claim is received and no further assessment is required, a decision will be made and the claimant notified within 10 working days;

* Fast-track claims or make advance payments when customers show they are in financial hardship as a result of the damage or loss leading to their claim;

* Enable claims arising from a natural disaster to be reviewed after they have been settled, recognising that communities are often traumatised when they assess their losses;

* If insurers are unable to provide cover, they will give reasons for the decision and they will refer customers to another insurer, the Insurance Ombudsman Service or the National Insurance Brokers Association (NIBA) for further information about insurance options;

* Provide better and clearer information to consumers regarding what is covered in their policies;

* Handle disputes and rectify mistakes in a transparent and efficient manner and in a specified time.

Compliance with the Code will be monitored by the independent Insurance Ombudsman Service who consumers will be encouraged to contact if they feel their insurer has breached the Code.

Policyholder reaction to the new code has been positive.

“Some of the advantages of the new Code of Practice are really good time lines for dealing with claims, better dispute resolution handling and a recognition that if you have made a claim, you may be in financial hardship and therefore need the claim settled more quickly,” Fiona Guthrie, deputy chair, Consumers Federation of Australia, said

“The approach adopted under the new Code means that there are now consistent standards, rules, and timeframes for all policyholders, and that will be welcomed by business,” commented Peter Hendy, chief executive, Australian Chamber of Commerce and Industry said.

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