Did you know that most insurance companies subscribe to the general insurance Code of Practice?
So, what is it and how can it help you?
The general insurance Code of Practice was introduced by the Insurance Council of Australia in 1996. It has since been reviewed and updated seven times, the most recent update having occurred in 2017.
Compliance is mandatory if the insurance company is a member of the Insurance Council of Australia (ICA) and they sell insurance products which are covered by the Code. For all other insurance companies, compliance is voluntary although the ICA recommends every general insurer adopt it. You can find a complete list of Code subscribers on the ICA website.
The Code of Practice covers most general insurance products including home and contents, motor vehicle, travel and consumer credit insurance. It does not cover all types of insurance though – the most notable exceptions being life, health, marine and workers compensation insurance.
The Code was initially introduced due to consumer dissatisfaction with the way complaints and disputes were being addressed by insurance companies and their representatives.
The aim of the Code is to raise service standard across the industry for the benefit of customers. It establishes standards of practice for insurers, their agents, representatives and employees in respect of their dealings with customers. It is hoped that industry-wide compliance with the Code of Practice will promote better relations, maintain and enhance trust and confidence in the insurance industry, provide fair and effective mechanisms for dispute resolution and improve the industry through education and training.
So, let’s take a look at a few provisions of the Code in detail.
Fair, efficient, honest and transparent dealings
A major element of the Code is the requirement that insurance companies and their representatives act at all times in a fair, open, honest and transparent manner. This applies to any part of their dealings with you including sales and claims. It means they can only ask for information which is relevant to their decision to insure you and/or assess your claim. You also have the right to access information on which the insurance company has relied to assess your application for cover or claim assessment. There are some exceptions to this of course – for instance if releasing the information would be prejudicial to the insurance company’s position or there is reasonable belief that fraud may have taken place.
Service Standards for claims handling
In addition to the requirement that claims be handled in a fair, efficient and transparent manner, the Code also sets down time-frames for claims handling.
Under the Code, the insurance company must decide to accept or deny your claim within 10 business days, provided they have all the information they need to assess the claim. If they require further information to process the claim, they must advise you within 10 business days of what they require and also provide you with an estimate of the timetable and process for making a decision on the claim. Either way, you should hear from your insurance company in relation to the claim within 10 business days – either to give you their decision or request further information.
If further investigation or assessment is required, the insurer should keep you acquainted with the status of your claim every 20 business days. If they decide to appoint a loss assessor or investigator, they need to advise you of this within 5 business days of that decision and also give you the identity of the company or person appointed.
In the event you make a routine request about your claim, the insurer must respond to you within ten business days.
Sometimes a policyholder needs urgent financial assistance. In such cases, the Code requires that the insurance company fast track the claim and provided the policy can respond, there is also provision for advance payments to be made to alleviate your financial hardship.
Whilst the Code sets down timeframes for claim handling so that claims are handled efficiently and quickly, sometimes compliance with these timeframes isn’t possible. The Code therefore allows for relaxation to these timeframes in “Exceptional Circumstances”. Examples of “Exceptional Circumstances” include catastrophes, fraudulent claims, instances where communication with you is difficult or you request a delay to the claim handling process.
In the event your claim is declined, the Code requires the insurance company to give you their reasons for this decision in writing. They must also advise you that you can access any information on which the insurance company relied to decline your claim and provide details of their Complaints process.
Complaints and Disputes
Unfortunately, disputes can arise in relation to insurance claims. The Code of Practice sets down standards and time-frames for handling complaints to the benefit of all parties.
A customer can make a complaint about any aspect of their relationship with the insurance company. Under the Code, subscribers agree to handle complaints in a fair, transparent and timely manner. As is the case with claims, the insurance company must only request and rely upon information which is relevant to their decision on the customer’s complaint.
The manner in which complaints must be handled does vary depending on the nature of the complaint. For instance, if the insurance company can resolve your complaint within five business days and you have not requested a decision in writing, the formal complaints handling process set down by the Code does not need to be actioned. If your complaint is about a declined claim, the value of a claim of Financial Hardship, this exemption does not apply.
An insurance company has 45 days to review your complaint and advise you of their decision. If the insurer is unable to provide their decision within 45 days, you can take your complaint to the Financial Ombudsman for review.
The complaint handling process is usually a two-stage process.
The first stage allows 15 business days from receipt of the complaint for the insurer to provide you with their decision. If you are not satisfied with the decision provided (or the insurer cannot respond to your complaint within the first 15 business days) your complaint can be escalated to Stage 2. This usually involves referral of the dispute to the insurance company’s Internal Dispute Resolution team who have the appropriate experience, knowledge and authority to review the earlier determination. As is the case with Stage 1, the Code allows 15 business days for the Stage 2 process to occur. In both cases, the Code does allow an insurance company and the customer to agree on an alternative timeframe for resolution.
However, once the Stage 1 and Stage 2 elements of the complaints process have been completed, if you remain dissatisfied with the decision reached by the insurer, you can then ask the Financial Ombudsman Service to review the matter. This is referred to as External Dispute Resolution. If the matter proceeds to formal determination by the Financial Ombudsman Service, the decision is binding on the insurance company (ie they must comply with the FOS Determination). The decision though is not binding on the customer and they can seek to take the matter into alternative dispute resolution forums if you wish (eg mediation or litigation).
The Code of Practice carries many other provisions for the way in which insurance companies should deal with their customers. These include circumstances where a consumer is experiencing financial hardship and also where an insurer has elected to repair or replace damaged property. There are also provisions relating to education, information and supervision of insurance industry operatives and how compliance with the Code is monitored and breaches of the Code rectified and sanctions imposed for non-compliance.
Click here for further information and to obtain a copy of the general insurance Code of Practice.
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