Yesterday’s code breach sanction against AIG adds to a “troubling pattern” of non-compliance by insurers, raising questions over industry self-regulation, consumer groups say.

The General Insurance Code Governance Committee imposed a $30,000 penalty on AIG for failing to tell customers that complaints had been delayed, or that they could take matters to the ombudsman.

The financial sanction was the third since the middle of last year: an unnamed insurer was penalised the maximum $100,000 in January and Allianz was ordered to pay $50,000 for a code of practice breach last June.

“This again exposes whether self-regulation in the insurance industry is working for consumers,” Financial Counselling Australia co-CEO Peter Gartlan said today.

“Insurers are not meeting even their most basic obligations under the code and, once again, it’s the most vulnerable in our community who are paying the price.”

Financial Counselling, the Consumer Action Law Centre and the Financial Rights Legal Centre have welcomed the action against AIG, while calling for tougher sanctions in the next code update.

“The new code needs to substantially uplift both consumer protections and penalties for non-compliance to have any meaningful impact on the status quo,” Consumer Action CEO Stephanie Tonkin said.

“We already know the fixes we need – it’s up to industry to implement them in good faith.”

Consumer groups say the $30,000 community benefit payment is low, but they have welcomed the naming of the insurer this time.

“This really should be the standard for all breaches of the code,” Financial Rights senior policy and advocacy officer Drew MacRae said. “If the insurer’s promise expressed in the code is to mean anything, we need to know who is not meeting that promise.”

AIG self-reported the breach in 2022 and made changes to fix it, but processes failed again and last September it reported the issues as another significant breach.

The insurer says 1.6% of claims were referred to its complaints process last year and it is committed to delivering timely and fair outcomes for all customers.

“We have implemented a remediation plan to comprehensively address the issue with increased resourcing, systems enhancements and operational improvements,” it said.

“This plan is successfully improving our service levels, and we are working to restore full compliance with the code as soon as possible.”

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