updates to the code have proven this. “Turning the code into predominantly blackletter law would defeat the raison-d’etre of self-regulation, and could perversely shift the consumer focus to examining all aspects of customer service through a purely legal lens. “This could stymie innovation and goodwill and remove code flexibility. It would be a detrimental and unfortunate step.” Mr Whelan says balancing the flexibility and principled intentions that commissioner Hayne considered essential with the legal enforceability he also required isn’t just an “immense challenge” to the industry, “but I expect also to regulators, consumer groups and the Federal Government”. Meanwhile, consultations on the code and its final drafts aren’t going to be delayed while the various interested parties – and the Government of Prime Minister Scott Morrison – debate exactly what the royal commission was getting at. Insurance News understands the Insurance Council board is now involved in the final phases of the code’s development and that the original schedule – in which it would be ready for implementation around the end of this year – has not changed at this stage. Mr Whelan says getting on with the job “is the responsible and prudent course of action. We are taking on board the recommendations and the underlying intent of those recommendations in the design of the new code”. While it may yet require major surgery to accommodate the royal commission’s views – and Mr Whelan says Treasury has recently sought submissions from ICA and other organisations to assist its development of relevant legislation – the code has already been through
a veritable gauntlet of examination and consultation. Apart from ICA’s member companies and the Code Governance Committee, key consumer groups, ASIC and the Finance Industry Council of Australia have also been involved in the development process since 2017. “I believe many stakeholders value the code and its agility compared with blackletter law,” he tells Insurance News. “This is evidenced by the amount of time and input these organisations, including consumer groups, have given to the review process.” ICA’s future advocacy of the advantages of self-regulation will doubtless be built around “its flexibility and capacity to rapidly adjust for changes to community expectations”. While Mr Whelan admits to being more concerned about the compromises that might be needed to cater for a legislative interloper into the self-regulatory code, he agrees that this has all come about through an issue that really had little or nothing to do with general insurance, but he’s prepared to look on the bright side. “The isolated issues raised about general insurance did renew and strengthen the industry’s desire to place consumer outcomes at the forefront of its business model,” he tells Insurance News. But he agrees the industry remains concerned “about ‘a one-size-fits-all’ approach being taken to all sectors” – a feature of government reviews and legislation over the past 30 years that have often compromised general insurance practices. “Any financial services reforms should sensibly acknowledge the characteristics of the general insurance industry and seek to enhance, rather than undermine, the capacity of insurers to sensibly and 0 prudentially underwrite community risks”.
Commissions ban: No need, no way The decision by the Hayne royal commission to bring in a three-year review of insurance broker commissions has caused considerable uncertainty in the intermediary sector. The review, which ends on June 30 2022, came in response to submissions by the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) calling for an end to the practice, even though it’s a standard feature of insurance in Australia, the United States and the United Kingdom. Mr Whelan says ICA does not support the banning of broker commissions. “[They] are an important part of the intermediated market and play a legitimate role in supporting the accessibility of general insurance products,” he says.
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“Commissions, when controlled and regulated, do not create conflicts. They are a way of allowing experts to provide product guidance to customers, in particular businesses and customers with complex insurance requirements, and build appropriate packages to protect their assets.” The commissions issue has been raised alongside controversial practices affecting intermediaries in the mortgage and financial sales systems, and Mr Whelan expresses concern about “one size fits all” solutions in the financial services sector. Noting that ICA endorses full transparency and disclosure of commissions to customers, he adds: “Commissionrelated issues that have affected other industry sectors must not result in an inappropriate ban on general insurance commissions paid to insurance brokers.”