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Code revamp must not ‘silo’ vulnerability, consumer groups warn

Customer vulnerability should be considered across “the entire journey of insurance” and protections improved in pricing promises, cash settlements and other areas, consumer groups have told an independent review of the code of practice.

The Insurance Council of Australia has correctly identified catastrophe responses, financial hardship and vulnerability as key focus areas for the review, the submission says. 

“The problem, though, is to see these topics as somehow divorced from the entire journey of insurance,” it says. “Siloing vulnerability to its own discrete area as something to address separately is counter to the tenets of inclusive design.”  

The submission by the Financial Rights Legal Centre has been made on behalf of a range of groups under the Consumer Federation of Australia umbrella.

Despite Hayne royal commission reforms, many critical matters that affect consumers remain unaddressed and the general insurance sector is falling short of community expectations, they say. 

On cash settlements, the groups propose measures including that insurers offer the services of a project manager if a policyholder is experiencing vulnerability, and proactively identify when alternative claim resolutions should be provided. 

If a claim is cash settled within 12 months of a disaster, a policyholder should have 12 months to ask for a review of the amount if it is found to be inadequate due to unforeseen circumstances. 

The submission says insurers should offer a renewal price to a consumer that is no greater than the equivalent price offered to a new customer, and they should not tell consumers they are being rewarded for loyalty “unless this is objectively true in an overall sense”. 

On financial hardship, it says insurers should consider providing short-term waivers and discounts and permit a hold or deferral of premium payments, among a range of measures. 

“During the covid-19 pandemic, many insurers did provide a strong response with respect to premium hardship measures and were largely transparent and proactive in doing so. This demonstrated that appropriate and flexible premium hardship responses are possible when there is genuine financial difficulty, and insurers are motivated to maintain customers.” 

Changes are proposed in identifying areas of vulnerability and disadvantage, and improvements recommended on policy questions and the way they are asked. The submission highlights issues around family violence, First Nations customers, mental health, LGBTQ+ people, blood-borne viruses, sex work and adult industry businesses, and customer personal insolvency. 

The submission says many sex workers have experienced discrimination or exclusion by insurance advisers or brokers and could be discriminated against because of “ostensibly moral judgments”, while some insurers ask questions about personal insolvency on policies with no obvious risk connection.  

“We have, for example, not seen any data to suggest that a person becomes a riskier driver as a result of entering personal insolvency,” it says. 

A principles-based approach on vulnerability needs to be complemented by more prescription on specific commitments, the submission proposes. 

“Both insurers and consumers need to know what can be relied on and expected as minimum standards. Unenforceable guidance falls into the trap of voluntary ‘aspiration’ and ‘best practice’ rather than establishing minimum standards and promises to consumers.” 

SMEs should have access to all commitments made in the code and the definition of an SME should be an organisation with fewer than 100 employees, providing consistency with the Australian Financial Complaints Authority, it recommends. 

On enforcement, the consumer groups say subscribers that breach the code should be named unless there are compelling reasons not to, and the code governance committee should have flexibility around applying minor or significant sanctions according to breach levels. 

The submission is available here.