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Issue 25 - May 2016

An update from the Code Compliance and Monitoring Team (FOS Code)


Bringing Banking code subscribers together for the Annual Bank forum.
Each year, FOS Code and the Code Compliance and Monitoring Committee hold a forum for Code of Banking Practice subscribers. Representatives from 13 code-subscribing banks attended this year’s forum, held in Adelaide in February.

We had another roster of engaging speakers this year. Ian Gilbert from the Australian Bankers’ Association presented on the Association’s outlook for the coming year in a complex and busy policy and regulatory environment. Philip Field, FOS’s Lead Ombudsman, Banking and Finance, spoke about how FOS uses the Code when making decisions in external dispute resolution cases. The event was also an opportunity for the Committee and FOS Code to talk to banks about our compliance monitoring program and investigations process in 2015–16.

Feedback on the forum was positive: attendees said that they appreciated the opportunity to network with colleagues and hear about other banks’ innovative strategies for improving practice and compliance.

Providing simple, practical code compliance advice for insurance brokers
To promote awareness of and compliance with the Insurance Brokers Code of Practice, FOS Code has taken to social media with a Tip of the Month series for code subscribers. Tips so far have dealt with Code awareness, staff training and positive breach reporting. The National Insurance Brokers’ Association (NIBA), the industry body that ‘owns’ the code, has brought the tips to its members’ attention by promoting them on LinkedIn and in NIBA’s member journal, the Gazette.

We have also worked with NIBA to publish and share case studies; introduce the new General Manager of Code Compliance and Monitoring, Sally Davis; and inform brokers about recommendations from the 2015 Annual Compliance Statement.

Taking an in-depth look at general insurance outsourcing and customer-owned banks’ community engagement activities
Own motion inquiries are an important part of our code monitoring and information-sharing work. Through these inquiries, we take a targeted, in-depth look at a particular area of code obligations. Evidence-based, proportionate and practical, own motion inquiries produce concrete and specific guidance for code subscribers looking to improve their service standards and compliance.

Two own motion inquiries will begin next month. In general insurance, the Code Governance Committee will examine how general insurers are complying with code obligations on outsourced debt collection and claims functions. A second own motion inquiry in customer-owned banking is due to examine institutions’ engagement with their communities.

Coming soon – general insurance industry data report
Due for release soon is the General Insurance Code Governance Committee’s Aggregated General Insurance Industry Data report for 2015–16. Drawing on a detailed analysis of data on insurance buying, claims, internal dispute resolution and code compliance, this unique yearly report sets out practical tips for industry and is an important source of data for all industry stakeholders.

The report will be published on the Code compliance publications web page before the end of this financial year.

Engaging with industry and the community
In the first few months of 2016, FOS Code has been out at community and industry events, raising awareness of the codes and supporting industry compliance and monitoring.

One of these events was the Financial Counsellors’ Association of Queensland (FCAQ) conference, which Investigations Manager, Linh Nguyen, attended in March. Under the banner of helping consumers manage their financial challenges, the conference covered a wide range of topics, from tax debt and mortgage stress through to problem gambling and economic abuse. “By and large, financial counsellors know that the industry codes of practice exist. The next step is showing how they are a relevant tool for financial counsellors and their clients,” said Ms Nguyen.

Code Committee appointments
Each code of practice is governed by an independent code committee. The following re-appointments were made in early 2016:

  • Dr Sue-Anne Wallace was re-appointed as independent Chairperson of the Customer Owned Banking Code Compliance Committee
  • Michael Gill was re-appointed as independent Chairperson on the Insurance Brokers Code Compliance Committee, while Julia Davis was re-appointed as Consumer Representative.

Outcomes from Code breach investigations
Case study – financial hardship in the General Insurance Code of Practice
In late 2015 the General Insurance Code Governance Committee made its first determination under the new financial hardship provisions in the 2014 version of the General Insurance Code of Practice.

The case
The customer, who had comprehensive motor vehicle insurance, was involved in a single vehicle accident that caused damage to his car. He lodged a claim with his insurer, which outsourced handling of the claim to a third party service supplier. The service supplier told the customer that he would need to pay a $750 excess on his claim. When the customer said that he couldn’t afford this excess and asked for financial hardship assistance, the supplier told him that he would not qualify. As a result, the customer instead borrowed $650 to pay for repairs that he arranged.

The code obligations
Under the code, insurers have obligations to customers in financial hardship – and these obligations extend to third party suppliers. If a customer owes but can’t afford to pay money to an insurer – typically an upfront excess on a claim – the insurer has to consider a request for assistance. This means providing a financial hardship assistance application form and contact details for the national financial counselling hotline.

The outcome
The Committee notified the insurer of the code breach concern, which prompted the insurer to waive the excess and reimburse the customer’s $650 repair costs.

Considering the evidence, the Committee determined that the insurer had breached the code by failing to appropriately consider the customer’s request for financial hardship assistance. Acknowledging the breach, the service supplier implemented refresher training on financial hardship for staff and team managers, which was supervised by the insurer’s Claims Delivery Manager.

About FOS Code
FOS Code is a separately operated and funded business unit of the Financial Ombudsman Service (FOS) Australia. We support independent Committees to monitor compliance with codes of practice in the Australian financial services industry to achieve service standards people can trust. Find out more about who we are and what we do.