The FOS Code team recently released the General Insurance Code of Practice: Overview of the Year 2012-2013 (2012-2013 GI Code Overview) on general insurance industry data and Code compliance.
Last financial year, Australian consumers and businesses took out more than 39 million general insurance policies to mitigate risk and protect their assets – from pets to property. But how well did the general insurance industry serve them? Our annual review of the compliance of Code participants with the 2012 General Insurance Code of Practice (the Code) offers valuable insights into the industry’s performance.
There are many ways to assess an industry’s performance, but when it’s a question of standards of conduct, a Code of Practice is a critical measure. In 2012-2013, 153 general insurers and Lloyd’s Australia Limited cover holders and claims administrators voluntarily subscribed to their industry’s Code and signed up to our program to assess their compliance with its standards.
The FOS Code 2012-2013 GI Code Overview highlights an industry that is engaging with its Code obligations. This was demonstrated by the quantity and quality of data provided to us by Code participants, which included self-reporting of non-compliance with the Code’s obligations, as well as key insights into emerging industry trends.
Industry performance against Code obligations
Identifying, self-reporting and remedying non-compliant activity with any Code of Practice are critical elements of a successful self-regulatory framework. We have encouraged a positive culture of self reporting by Code participants so that we can work with industry to reduce risk and improve service delivery.
In response to this culture, during 2012-2013 Code participants self-reported – and remedied – 6,185 breaches of the Code, representing a 127% increase on 2011-2012 figures. While this is a significant increase, we do not believe it reflects a commensurate increase in non-compliant activity, but rather a more active engagement with the self-reporting framework.
Our review found that more than 50% of all breaches were caused by a failure to adhere to established internal processes and procedures, which was also the leading cause during the previous reporting year. Code participants are aware of this, and have introduced some innovative systems and high-tech solutions to strengthen their compliance over the coming year. They’ve also invested heavily in their people, training more than 35,000 staff and Authorised Representatives in their Code obligations.
The General Insurance Industry by the numbers
While general insurance policy numbers remained steady overall during 2012-2013, sizeable growth was recorded in certain classes of insurance – particularly in consumer credit and some classes of commercial insurance – mirroring changes in Australian society more broadly. Significant increases were also recorded in the number of internal disputes and declined claims, which warrant closer scrutiny from the industry.
Customers made 3.8 million general insurance claims in 2012-2013. Code participants declined 2.6% of claims lodged in the reporting period, representing a 2% increase on the previous reporting year.
Internal dispute numbers were up 10% in 2012-2013. Customers raised 31,894 internal disputes with their insurers, resulting in outcomes predominantly in the insurers’ favour. We encourage industry to examine internal dispute resolution outcomes across all classes of business, together with FOS external dispute resolution information, to monitor resolution trends carefully and identify and remedy any areas of non-compliance which may have been the cause of disputes.
A copy of the FOS Code 2012-2013 GI Code Overview is available here.
Code in transition
FOS Code’s work with the general insurance industry to improve standards of practice and service has placed Code participants in a strong position to transition smoothly to a new industry Code, which comes into effect on 1 July 2014.
Code participants have 12 months to ensure their business’s standards of practice and service meet the new obligations outlined in the new Code.
The FOS Code 2012-2013 GI Code Overview is accompanied by a preliminary guide to help Code participants transition to the new Code by 30 June 2015.