Insurance News magazine August/September 2026
Code words spell trouble
The redrafted rule book for insurers faces accusations that protections are being eroded
By Wendy Pugh
Consumer groups say a substantial general insurance code of practice rewrite has taken the document backwards on some protections, while the compliance committee warns it might not gain a regulatory green light, despite the industry maintaining it raises the bar.
The Insurance Council of Australia has received about 30 submissions on the draft, including some last-minute contributions, and after considering the feedback will lodge the document with the regulator in late October.
The extensive redraft follows decisions to make this version enforceable as part of consumer contracts for the first time, and to seek Australian Securities and Investments Commission approval.
Deputy chair Richard Feledy told ICA’s annual dinner last month the code is not just a compliance exercise but reflects a commitment to continually improving customers’ experience when dealing with insurers, particularly where there is vulnerability.
“The updated code will deliver stronger protections for customers,” he said. “It strengthens accountability and it helps ensure people receive the support they need when they need it most.”
ICA highlights that claims undecided after 12 months will be automatically accepted, subject to defined exceptions, and higher standards will apply for expert reports, among other changes.
“Some provisions have been redrafted in practical terms, setting out precisely what insurers will deliver so consumers can hold them to it,” a spokesperson tells Insurance News. “Every one of these changes raises the bar for consumers, today and into the future.”
The Financial Rights Legal Centre says 65 current clauses have gone backwards in terms of consumer protections in their transfer to the redrafted code.
Some are minor edits that prioritise the insurer’s interest, but many are more significant and demand reconsideration, it says.
The redraft has fallen “far short” when it comes to findings from the independent code review and the parliamentary inquiry into the 2022 floods, it says. The centre’s analysis shows that out of 127 combined recommendations, insurers have fully met 35, partially met 51 and have not addressed 41.
“We welcome the handful of new protections in this redraft and, yes, we welcome the announced intention for the code to be enforceable as a part of the contract between insurers and the consumer,” principal for policy development Drew MacRae says.
“However, the trade-off for an enforceable code cannot be a weakened code.”
The Financial Rights Legal Centre submission is supported by 10 other organisations including Choice, Financial Counselling Australia, Consumer Action Law Centre, Australian Consumers Insurance Lobby, Mob Strong Debt Help and ARC Justice.
The code governance committee, which monitors and enforces compliance, says without 10 priority changes the document will not meet community expectations or reflect best practice and will be a step back from current commitments.
It also suggests additional proposals to improve the code’s clarity and operation, address gaps and inconsistencies, support compliance and help the industry respond to emerging risks and changing community expectations.
The committee welcomes contractual enforceability and several important new commitments, including broader recognition of vulnerability, stronger protections around family and domestic violence, trauma-informed care and higher standards for expert reports.
“Many other proposed changes would, however, weaken existing customer protections, reduce insurer accountability and limit the independent oversight that makes the code effective,” it says.
Proposed governance arrangements may not meet ASIC requirements, placing approval of the document at risk, the committee warns. Specific issues include limiting investigations to “serious and systemic” breaches, and requirements around considering ICA “intent” in drafting and including a code provision.
The document has loosened a requirement to inform consumers of a complaint’s progress every 10 business days, submissions highlight, and a clause on “honest, efficient, fair, transparent and timely” dealings is instead reflected in guidance principles that are not part of the code.
A proposed 24-month transition period would mean – if the code does not start until late 2028 or early 2029 – that some changes may not take effect until almost eight years after the current version began, the committee says.
Claims Hero, which makes 35 proposals, takes issue with subjective terms such as “if we believe” and “if satisfied” and undefined thresholds such as “sufficient reason” or “outside our control”.
“It is clear that the code has been drafted through a legal lens, with the interests of insurers prioritised,” managing director Luke Dugdell says.
ICA says the draft has been developed through extensive consultation and draws on recommendations from the independent code review, the parliamentary flood inquiry and an industry action plan.
“The world has changed and the code needs to keep pace with those changes; customers face more frequent extreme weather, more complex claims and new technology that is reshaping every part of the insurance process,” CEO Andrew Hall says.
The peak body says it is committed to a thorough examination process that includes reviewing all submissions and feedback and a considered response on input to the draft will be provided ahead of lodgement with ASIC.
Broking balance and life changes
Brokers and life insurers are also overhauling their codes of practice, with remuneration disclosure and rising mental health claims proving challenging issues in the respective sectors.
The National Insurance Brokers Association says it has balanced the perspectives of brokers, clients, other stakeholders and the public interest test in a code review process that represents a rigorous reset.
The draft document – rewritten in plain English – strengthens protections for vulnerable clients, introduces a 28-day pre-renewal contact commitment and makes record-keeping a code obligation.
On remuneration, any client can ask their broker at any time what they are paid and will receive the figure in dollars, regardless of product, while an automatic disclosure obligation has been extended beyond retail clients to strata.
But the draft does not include an independent reviewer recommendation to require remuneration disclosure for all individual and small business clients, regardless of insurance product, after NIBA earlier in the process indicated support.
This issue became a flashpoint during the previous code review, with arguments that unsophisticated small businesses deserve the same disclosure as individuals and the definition of retail client in the Corporations Act is too limiting.
The code compliance committee and industry expert John Trowbridge are among those that have continued to press for broadening the disclosure transparency.
“The main thing has always been to effectively cover the disclosure issue, and to walk away from that is just astonishing,” committee chair Oscar Shub says. “We will be doing whatever we can, making whatever representations we can, to reverse that decision.”
NIBA chief executive Richard Klipin says every obligation a code adds is an obligation someone administers, documents, trains for and pays for, and the board weighted simplification against complexity on every proposed change.
The group has cited research into the positive experiences of clients and Australian Financial Complaints Authority data that shows brokers account for less than 1% of disputes.
“Through two rounds of consultation, across every channel, the argument for expansion was made in principle rather than from demonstrated client harm,” Mr Klipin says.
Consultations on the draft document closed on August 7 and NIBA is aiming for the new document to start from January.
“Landing a revised code is a challenge and it’s important that we weigh and balance different perspectives appropriately,” Mr Klipin says. “On the hardest questions, there was no answer available that would satisfy everyone, and a code drafted to satisfy everyone would have satisfied no one.”
For life insurers, the approach to mental health conditions and the increase in claims have proved the most challenging issues for their code update.
Independent reviewer Peter Kell released an interim report in April and a final report at the end of June with 85 recommendations across areas that also include vulnerability, claims handling, medical definitions, advertising practices and blood-borne diseases.
On mental health, recommendations include an overall commitment to dealing appropriately with customers, and a requirement that any standard form limitation is supported by documented actuarial or statistical data and consideration of other relevant factors.
But Mr Kell says the current code update alone will not address mental health claim cost pressures.
“There are aspects of this issue that cannot simply be resolved at this point through a change to the code, but rather will require industry to engage with stakeholders to consider in more detail an appropriate path forward that supports both sustainability and the fair treatment of customers,” he says.
On funeral insurance, the reviewer recommends a guarantee in which the benefit paid under a policy would be the higher of the insured sum or cover amount and total premiums paid, and that it should not be sold to people under 40 years of age.
The Council of Australian Life Insurers will release an initial industry response to the reviewer’s report by September 30.
