The Insurance Council of Australia will make its new code of practice contractually enforceable and says it expects to submit the revamped document for regulatory approval in the middle of next year.

The development and drafting process will involve further consultation with ICA’s consumer advisory council, regulators, government and other experts, and a public consultation is expected in the first quarter of next year.

The extensive rewrite follows various amendments and iterations of the original document developed in 1993. The current version was also “comprehensively updated and rewritten”. 

“A lot has changed in 30 years, and the pace of change is only expected to accelerate moving forward, impacting all aspects of insurance from underwriting through to claims handling,” ICA CEO Andrew Hall said.

“Equally, since 1993, governments have enacted a significant amount of new legislation and regulation that now governs the industry across how insurance is designed, sold and used, and these baseline requirements are being enforced by regulators.” 

ICA says the code should be clear, concise and relevant, but stakeholders say it can be difficult to understand and does not reflect contemporary challenges facing consumers and insurers.

Mr Hall says a well-functioning code must balance the need to generate trust in the industry’s consumer protections with the flexibility to provide accessible and affordable products as extreme weather risk and pricing pressures grow.

“Where appropriate, the revised code will include some prescriptive provisions, including those which demonstrate recent inquiry recommendations have been accepted,” he said.

The next stage of the update process follows the release last year of recommendations from an independent code review panel. The parliamentary inquiry into the 2022 floods also sought code strengthening on some matters.

As well as rewriting the code, ICA says the industry is working on other flood inquiry recommendations, including giving “in-principle agreement” to having internal consumer advocates support customers with claims processes.

“Noting the diversity of business models across insurers, each insurer will consider how best to implement this role internally,” it said.

Consumer groups including the Financial Rights Legal Centre, Financial Counselling Australia and the Consumer Action Law Centre have welcomed the decision to make the code contractually enforceable, but have raised concerns about the rewrite and the length of the process.

“We’re pleased that the industry has committed to incorporating the code in customer contracts,” Consumer Action Law Centre senior policy officer Rose Bruce-Smith said.

“However, it’s essential that this step forward doesn’t come at the expense of any consumer protections.”

Financial Rights Legal Centre senior policy and advocacy officer Drew MacRae says the new document must address issues in the code review and flood report, and consumer groups will be watching changes made in the redraft.  

“We don’t want this to be some sort of Trojan horse to attempt to weaken the wording or remove commitments already made,” he told insuranceNEWS.com.au.

It will be at least 2027 before the code takes effect – five years after the flooding that fuelled calls for improvement – and insurers should not wait for the new document before making changes in communication, claims handling and other areas, he says.

“We are saying, don’t leave consumers waiting, operationalise those now and uplift now. Essentially the code would be putting a stamp on it at the end.”