General Insurance Code Governance Committee – Release of Annual Report 2020-21
The General Insurance Code Governance Committee (the Committee) is pleased to release its Annual Report for the 2020-21 Financial Year. In this year’s report, the Committee acknowledges that the past year has once again presented significant challenges for both the industry and consumers alike. However, Committee Chair Veronique Ingram PSM noted this environment had also presented opportunities for Code subscribers to emerge as more flexible and resilient in the face of future crises.
“The continued impact of both COVID-19 and natural disasters have demonstrated the need for a robust, agile and sustainable general insurance industry that can respond to national emergencies while continuing to treat consumers in a fair, reasonable and ethical manner,” she said.
The report details the Committee’s work throughout the year to monitor and enforce subscribers’ compliance with the General Insurance Code of Practice (the Code). This included reviewing Code subscribers’ implementation of important new obligations in the 2020 Code for supporting customers experiencing vulnerability, financial hardship and family violence. The Committee also investigated allegations of Code breaches and reports of significant breaches by Code subscribers.
The Committee’s stakeholder engagement included regular meetings with individual Code subscribers and the Insurance Council of Australia (ICA), as well as meetings with consumer advocates, government and regulators, and the Australian Financial Complaints Authority (AFCA).
Phased introduction of the 2020 Code
The 2020-21 Annual Report is the first to provide insight into Code Subscribers’ performance in line with the requirements of the 2020 Code that came into effect on 1 January 2021 and the Committee noted most subscribers had met this implementation deadline.
These important obligations provide additional protections for consumers who are experiencing vulnerability (Part 9) or in financial hardship (Part 10). This year’s report shows that Code subscribers reported 165 breaches of Part 9 and 141 breaches of Part 10.
Ms Ingram said the Committee will continue to pay close attention to the operation of the new and expanded provisions of the 2020 Code (which came into full effect on 1 July 2021).
“It’s critical that Code subscribers understand their responsibilities to act both within the letter and the spirit of the Code to ensure we are continuing to see the improvements in consumer outcomes that will help us maintain and promote trust in the general insurance industry,” she said.
Increase in self-reported breaches continues
In 2020-21, Code subscribers reported 41,768 breaches of the Code to the Committee, a 27.1% increase on 2019-20. This was the fifth consecutive rise in reported breaches and the Committee is focused on seeing that figure reduce significantly over coming years, through improvements in subscribers’ governance and compliance frameworks.
“While it’s encouraging to see Code subscribers embrace self-reporting, it’s important that self-reporting on its own is not seen as the goal and the Committee will be working closely with subscribers to support a rapid improvement in these numbers going forward,” Ms Ingram said.
“We look forward to seeing subscribers pay closer attention to identifying the root causes of these breaches, as well as improving their processes and procedures, to ensure we see these numbers start to come down in future reports.”
Code breaches by section
The following four sections of the Code accounted for 98% of the breaches reported by Code subscribers this year:
- 26,152 breaches of Section 7 (Claims), up from 16,730 breaches in 2019-20 (a rise of 56%);
- 6,821 breaches of Section 10 (Complaints and Disputes), down from 8,244 breaches in 2019-20 (a drop of 17%);
- 4,324 breaches of Section 14 (Access to Information), up from 3,555 in 2019-20 (a rise of 22%); and
- 3,693 breaches of Section 4 (Buying Insurance), down from 3,973 in 2019-20 (a drop of 7%).
Code subscribers reported a total of 131 individual significant breaches in 2020-21, following 112 reported in 2019-20. The main issues that led to significant breaches closely mirrored those of Code subscribers’ self-reported breaches:
- Section 7 (Claims) – 51 significant breaches (up from 41 in 2019-20),
- Section 4 (Buying Insurance) – 37 significant breaches (down from 40 in 2019-20), and
- Section 10 (Complaints and Disputes) – 28 significant breaches (up from 11 in 2019-20).
Code subscribers also provided the Committee with the following overview of their operations:
- 5 million general insurance policies were sold to consumers and businesses, down 10% from 43.8 million sold in 2019-20,
- Motor vehicle policies (41%) and home policies (29%) accounted for more than two-thirds of policies sold,
- 4 million claims were lodged, down 7.3% from 4.7 million in 2019-20,
- 226,458 claims were declined (down 2.2%) and 350,464 claims were withdrawn (down 4.4%),
- 48,685 complaints were received about general insurance products or services, up 17% from 41,608 complaints in the previous year. Most complaints were in relation to motor insurance (47%) and home insurance (39%).
About the General Insurance Code Governance Committee
The Committee is an independent body responsible for monitoring Code subscribers’ compliance with standards in the General Insurance Code of Practice (the Code). The Committee aims to help the industry provide services that meet the needs and expectations of consumers.
As at 30 June 2021 there were 49 Code subscribers and a further 122 Lloyd’s Coverholders and Claims administrators bound by the Code.