Only 18 months after the introduction of the Life Insurance Code of Practice the industry is preparing for the version 2.0 of the Code, based on an analysis of results and also on more than 30 submissions.
Anne Brown, the Chair of the Life Code Compliance Committee, told a Plenary session at the FSC Life Insurance Conference that results from the first annual compliance monitoring exercise were set to be released in April, showing that of over 130,000 claims made in 2018-18 around 90 percent of both income and non-income related claims were paid “within required time frames.”
Brown said there had been 164 “multiple breach events” of the Code, and the “vast majority” of these were systems related.
“These were legacy systems which couldn’t be amended in time, or merged or fixed properly, and impacting on a substantial number of subscribers,” she said.
There were also another 8,000 individual Code breaches, 60 percent of which related to claims.
“We are not suggesting that these were in any way malicious or manipulated,” said Brown.
“They were predominantly people issues, such as manual errors, a lack of training, and not following processes.”
FSC Senior Policy Manager for Life Insurance, Nick Kirwan, who moderated the session, asked panelists to give the Code’s first 18 months of operation a score out of 10.
While Compliance Committee chair Anne Brown rated it at 7, another panelist – John Berrill – was more optimistic, giving it “closer to 8, or 7.5.”
Berrill, who works on the consumer side in his work at law firm Berrill & Watson, said it should not be forgotten that the current Code was the first of its kind for the industry since 1995.
“We had a code in 1995, and then there wasn’t a code for 20 years,” he said.
“So this code is a long way behind the banking code and insurance code.”
While there was “some ambitious stuff” in the first Code, some issues had been “kicked down the road a bit” and would be dealt with in Code 2.0.
The third panelist, John Myatt, pointed to ASIC data in response to Kirwan’s question on rating.
“I look at 92 percent, and that is the figure from ASIC on claims paid in the first instance,” says Myatt, a Life Insurance specialist at commercial law firm TurksLegal.
“That statistic doesn’t get enough traction.”
The panel agreed that Code 2.0 was an opportunity to address some of the issues identified over the last 18 months, such as how Code subscribers can take more responsibility for third party distributors of their products.
One upcoming issue, from outside of the industry, was that of enforceability, either by regulation or legislation.
This presented challenges, as the original Code was conceived as a promise to customers, and some of the provisions on culture would be difficult to make enforceable through sanctions and compliance obligations.
Would there, as Nick Kirwan asked, be an “empathy provision” enshrined in regulation?
Anne Brown agreed that this would present “a challenge and involve an awful lot of subjectivity” in making a Code, much of which relates to culture and ethics, enforceable by law.