The Insurance Council of Australia will deliver some key firsts with the next update of its code of practice, while grappling with issues highlighted during the 2022 floods inquiry.

For the first time, the code will be embedded in customer contracts, providing another avenue for enforcement, and it will be submitted to the Australian Securities and Investments Commission for approval.

Other key changes in the draft released last week include that home and motor claims will be automatically accepted after 12 months when no decision has been made, subject to defined expectations.

A new definition of vulnerability adopts a circumstances-based approach, there is an expanded definition of urgent financial need to explicitly include essentials, and a broadened family violence definition.

An obligation for compliance with ICA’s expert report best practice standard has been introduced and a new definition of “claims fulfilment provider” added.

It’s been a long process getting to this point. An independent code review, launched in November 2023, delivered more than 100 recommendations in late 2024, many overlapping with flood inquiry proposals.

ICA delivered an action plan in March last year that represented a second tranche of responses to the inquiries, and on May 30 last year said it said it would be completing a significant code redraft.

Submissions on the draft are due by July 21, more consultations will take place before it goes to ASIC, and a 24-month transition period to the new rules is envisaged.

Financial Services Minister Daniel Mulino, who chaired the parliamentary floods inquiry, is among those keeping a close eye on progress.

The inquiry directed many of its recommendations to the industry and called on insurers to respond through their self-regulatory document.

“I welcome the fact that it’s going to be ASIC-approved. I welcome the fact that it’s going to be contractually enforceable,” Dr Mulino told insuranceNEWS.com.au ahead of the draft document’s release. “But it is going to be important to see what some of those key clauses – like claims management, cash settlements, temporary accommodation, dispute resolution – look like.”

The door is open for ASIC to conduct further inquiries if required, with its Regulatory Guide 183 noting this is more likely if there are major changes, significant differences in views on the content, independent review recommendations are not fully adopted or the industry’s consultation is insufficient.

“Where approval by ASIC is sought and obtained for a code, it is a signal to consumers that this is a code they can have confidence in and rely on,” the regulator says.

Consumer groups have expressed concern in early responses, including that extra care for vulnerable customers is outlined in a separate guidance document rather than in the code text. They also fear that making the document contractually enforceable may have come with some watering down of commitments.

“Financial Rights will be undertaking a forensic examination of the redraft in the lead-up to making a submission to this consultation to ensure general insurers take the necessary steps to introduce meaningful minimum standards that address core concerns,” Financial Rights Legal Centre principal of policy development Drew MacRae said.

Mr MacRae points out looser wording changes including that insurers will keep a policyholder “informed on the progress of your complaint” and give monthly updates, whereas currently the code mentions keeping someone informed every 10 days.

Clauses affecting the code governance committee’s ability to hold insurers accountable include that it may impose sanctions for a significant breach unless the beach is being considered by another regulatory body or court, while in determining sanctions the governance committee should consider ICA’s intent in drafting and including a provision.

Australian Consumers Insurance Lobby chair Tyrone Shandiman says the draft has fallen short and “self-regulation is a privilege, not a right”.

After this document it may be some time before the next overhaul, with the changes also proposing moving to a five-year period for formal independent reviews.

ICA CEO Andrew Hall says the new code provides an uplift in protections and includes practical changes that put the customer first, and the group wants the document to be the strongest it can be.

“The world has changed and the code needs to keep pace with those changes; customers face more frequent extreme weather, more complex claims and new technology that is reshaping every part of the insurance process,” he said.

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