The latest version of the General Insurance Code of Practice – the fourth since 2006 – appears to have achieved a balance between the interests of insurers and consumers.

It’s better than the last one, which will remain in force until July 1 next year. And it should be, having gone through a year-long review process, much controversy and a very carefully considered rewrite.

The absence of any concentrated criticism from the various consumer advocates in the week since the draft of the new code was published by the Insurance Council of Australia (ICA) would tend to indicate they see it as a workable document, or at least one they can live with. 

The new code’s recognition of the need to assist people in financial difficulty answers one of the advocates’ main criticisms during the review process – a criticism that became one of the key planks of the review conducted during 2011 by lawyer Ian Enright.

As expected, ICA has ignored Mr Enright’s controversial call for an independent “code governance body” to set the rules and monitor the behaviour of signatories.

The body was to be independent of industry control or influence, with three independent members, one person representing consumers and one industry member.

Mr Enright also wanted a sanctions committee to decide suitable punishments for transgressors, a promotion, education and training committee and a policy committee. 

These ideas were never going to make it. Apart from being revolutionary, they were seen as flying in the face of what “self-regulation” is meant to be about. As insuranceNEWS.com.au suggested in our Analysis of the review document last August, it was going “too far, too fast”.

At that time ICA made it clear that it sees itself as “the appropriate framework for industry self-regulation under the code”. But it has demonstrated its openness to change with a tidy-up of the workings of the code compliance committee and a name change to “code governance committee”, comprising a consumer representative, an industry representative and an independent chairman.

It will make recommendations, investigate breaches by insurers and “sanction” offending companies by enforcing rectification or naming them. It appears the only substantial change is, in fact, its name.

The council has always intended that the general insurance code should be one of the first to be ratified by the Australian Securities and Investments Commission, and there’s little doubt this one is the best of the three brought into the industry so far – even if it’s carefully evolutionary rather than revolutionary in its approach.

The revised code is nevertheless what ICA President Mark Milliner believes will “set the benchmark for industry self-regulation in Australia”.

It certainly ticks most of the regulator’s boxes. It’s in plain English, shorn of much of the elaborate diction of the lawyers, and it’s much less cumbersome in providing reassurance to claimants, explaining in simple terms what to expect in the process, the service levels that must be met and how to complain if things go wrong.

Last year Insurance News (the magazine) published a paper from an unnamed insurance executive asking why the industry needs a code of practice at all now it is hemmed in by consumer-friendly laws that didn’t exist when the first code came into force in 2006. Legislative change has certainly made the industry more attentive to consumer rights, and the laws keep coming.

And Mr Enright pointed out in his review report last year that we’ve gone through more than 20 years “of constant regulatory change in prudential and consumer protection or market conduct regulation” – a process that has stretched the industry’s (and the regulators’) resources.

The regulators should give the insurers’ latest version of the code of practice a chance to show how industry self-regulation can so often be more effective than black letter law.