A life insurance code that is approved by the Australian Securities and Investments Commission will send a “powerful signal” to consumers and key stakeholders, the financial services ombudsman says.

The Australian Financial Complaints Authority has also urged code reviewer Peter Kell to consider making the document enforceable.

“AFCA recommends that the code, once reviewed, is submitted to ASIC for approval,” the authority said in a submission.

“ASIC approval is a powerful signal to all stakeholders that the code is one they can have confidence in.”

The complaints authority says an enforceable code “would provide consumers a clear mechanism to hold insurers directly accountable for code breaches. AFCA considers that the code must be enforceable if it is to effectively deliver on its promises to consumers.”

Consumer advocates have made similar recommendations on code enforceability and ASIC approval.

However, law firm Clyde & Co says “greater enforceability is not necessarily the answer” if the aim is to benefit consumers.

The firm’s consultant, Jessica Thurtell, told insuranceNEWS.com.au the code already “influences” claim outcomes through AFCA’s fairness jurisdiction.

“While AFCA cannot currently enforce specific provisions of the code, it uses the code as a benchmark for good industry practice and as a relevant consideration in determining whether an insurer has acted fairly and reasonably,” she said.

“Consumers therefore already obtain outcomes from AFCA relevant to code requirements.”

She notes consumers may not try to enforce code provisions in court “unless the potential financial outcome outweighs the financial costs outlaid to achieve it – particularly where they can seek a similar outcome through AFCA”.

Mr Kell is expected to provide a final report to the Council of Australian Life Insurers by June 30.