Insurer code of practice submissions from underwriting agencies, brokers and restorers have highlighted issues relating to contractual enforceability, small business repercussions and repair standards.

The Insurance Council of Australia last week released 28 submissions on the draft version of its code rewrite – with two remaining confidential – as it crafts an improved version to submit to the regulator.

The plan to make the code contractually enforceable has generated extensive feedback despite widespread support for it.

The Underwriting Agencies Council takes issue with the “wide net” of contractual enforceability when combined with a lack of delineation between minor and significant breaches.

It warns of increased exposure to vexatious or frivolous litigation over technical or minor breaches, potential class actions and inflationary effects on premiums due to a heavier compliance burden, at a time when affordability is a critical issue.

UAC suggests reducing the number of provisions that are contractually enforceable, targeting areas that are clear, certain and objectively measurable, and where breaches would be considered significant.

The group is also concerned about the implications arising from definitions of vulnerability and extra care, and suggests a phased approach.

“Certain vulnerability-related obligations may be better suited to be situated within the ICA’s non-binding vulnerability guidance, at least during an initial implementation period,” it says.

Consumer groups, the Australian Financial Complaints Authority and the code governance committee have in previously released submissions backed contractual enforceability but have suggested it has come with weakened protections.

“In our view, the imperative to make the code contractually enforceable has resulted in perverse outcomes,” AFCA says.

These include hollowing out concrete commitments, or moving them into unenforceable guidance, and undermining the compliance and supervisory framework, it says.

The National Insurance Brokers Association submission says its most significant concern involves a redrafted wholesale insurance definition that has the practical effect of reducing protection.

The new definition excludes business interruption; contractors all risks; fidelity guarantee; legal liability including public and product liability; professional indemnity including management liability, directors and officers, and tax audit insurance; cyber; and industrial special risks.

“They are neither retail insurance nor wholesale insurance as redefined, and no part of the code applies to a product that is neither,” NIBA says.

“This is a move from limited but real code coverage to none.”

NIBA welcomes clearer claims time frames but says they “set a low bar” for the pace at which customers can expect resolution and should be reframed as outer limits for complex matters.

The ICA draft says insurers will decide a claim within four months of receipt, extending to 12 months where certain circumstances apply – including an external expert’s report being delayed. The experts have 60 days to provide a report.

“NIBA is concerned that time frames at this level do little to shift insurer behaviour towards the urgency customers recovering from a loss need, and that the cost of delay – to customers first, and ultimately to the system through higher claims costs and complaints – is understated in the current drafting,” it says.

On complaints, NIBA says there should be a clear customer-driven trigger for updates, such as on request or where an insurer considers an update would assist.

Proposed wording says an insurer will “keep you informed” on progress.

“A complainant who knows they can ask for an update, and will receive one, is better served than one left to wonder whether silence means inaction,” NIBA says.

The group also suggests the code and extra care guidance could be clearer about how insurer obligations and the broker’s role fit together around vulnerability.

“More broadly, NIBA notes the strongest consumer outcomes are achieved where vulnerability protections are enforceable and independently overseen, rather than left to voluntary guidance,” it says.

The Restoration Industry Association says the redraft imposes conduct obligations on claims fulfilment providers but does not anchor the quality of work to recognised technical standards, and has weakened qualification and competency requirements.

Since the current code was produced, Australian Standards have been adopted for water damage restoration and mould remediation, providing nationally recognised benchmarks.

RIA proposes work should have to meet the standards, or recognised international versions where no local document exists.

The Australasian Institute of Chartered Loss Adjusters challenges the removal of a clause on education and training standards required of service suppliers.

It also calls for the definition of loss adjusters to be amended to reflect their advisory role and that the code requires to make clear that claims fulfilment providers do not provide opinions on the application of policy terms or insurance coverage.

ICA says it is considering all the feedback and expects to submit the revised code to the Australian Securities and Investments Commission for approval later this year.

Submissions are available here.