Law firm Maurice Blackburn says the insurance industry’s self-governing code of practice has failed consumers and should be replaced “as early as possible” with legal enforcement.

The plaintiff law firm is the latest to join the growing list of consumer advocates opposed to financial services providers – including insurers – having control of self-regulating industry codes.

Insurers have long maintained the voluntary, self-administered regime produces the best outcome for consumers and the industry.

But Maurice Blackburn says the time has come for enforceable and mandatory codes, citing the findings last month in the Code Governance Committee report where insurers copped heavy flak over their recent compliance performance.

“While it is always preferable to entrust an industry to properly care for its customers through self-regulation, that is a privilege that needs to be earned,” Maurice Blackburn Superannuation and Insurance Principal Josh Mennen said.

“It is patently obvious to everyone, particularly in the wake of the Hayne royal commission, that the insurance industry has, for the time being, lost its social licence to self-regulate through codes of practice.

“Indeed the General Insurance Code of Practice has been in place for over 20 years yet the general insurance code administrator recently announced that some insurers have not taken their code obligations seriously and failed to act in good faith."

The Insurance Council of Australia has rejected calls from Choice and the Superannuation Consumers’ Centre to remove what they have described as “useless” industry-run codes.

But Mr Mennen says a “stronger approach” is needed “to force the hand of the industry once and for all, which is why we have called for the Federal Government to prescribe mandatory and enforceable codes, rather than maintain the current status quo of a voluntary industry code regime.

“It is now well past time for the owners of these codes… the Insurance Council of Australia, to be forced to do the right thing in finally delivering mandatory and enforceable codes.”

In its submission to the Treasury consultation paper on code enforcement, Maurice Blackburn says Canberra should work on the issue and implement the changes “as early as possible”.

It wants Treasury to look into extending the provisions of enforceable codes to other stakeholders such as third party agents or representatives of insurers, reinsurers and professional indemnity insurers.

Insurance Council spokesman Campbell Fuller said the voluntary code of practice did not draw “significant criticism” in the Hayne royal commission’s final report.

The industry is currently reviewing the code, and Mr Fuller says it will work to ensure it “preserves the benefits of self-regulation and seeks to enhance consumer outcomes by simplifying, and not complicating, the framework within which industry codes operate”.