The Insurance Council of Australia will this year seek regulatory approval for standard policy definitions of home maintenance and wear and tear, as it also moves ahead with a revamp of the industry code of practice.

Insurers have drawn fire for denying claims due to wear and tear and maintenance issues without clearly outlining to consumers what is required to avoid the exclusions.

The parliamentary floods inquiry proposed a distinction be made between observable and unobservable problems, and the issue was also raised by the independent code of practice review in the context of expert reports.

Insurers have said competition laws hinder a consistent approach, but ICA has been working to develop clauses for approval by the Australian Competition and Consumer Commission.

“ICA intends to make an application to the ACCC in the second half of 2025 to authorise insurers to use standard policy definitions relating to home maintenance and wear and tear,” it said last week.

ICA says its expert report best practice standard will be referenced in the new code, which will be redrafted this year before a public consultation in the first quarter of next year.

It has indicated a complete overhaul of the document, which will be made contractually enforceable. ICA plans to submit it to the Australian Securities and Investments Commission for approval in the middle of next year.

CEO Andrew Hall says since the first code was developed in 1993, governments have enacted plenty of new legislation and regulations governing how insurance is designed, sold and used, and these baseline requirements are being enforced by regulators.

“A well-functioning code must balance the need to generate trust in the robustness of the industry’s consumer protection frameworks with the flexibility to ... continue to provide accessible and affordable products to Australians as extreme weather risk and pricing pressures continue to grow,” he said.

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

ICA says its 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.

Consumer groups have welcomed the proposed inclusion of the code into contracts with customers, but they warn against watering down protections in the redrafting process. 

“Any move to weaken or otherwise undermine existing and much-needed new consumer protections in the code will simply not meet community expectations,” Financial Rights Legal Centre senior policy and advocacy officer Drew MacRae said.

“Both the code review and flood inquiry have called for more commitments, not fewer.”