The great insurance con: A friendly reminder that 'self-regulation' isn't working

It’s ANZAC day coming to an end and I have been wanting to write about this topic for a while, here goes…

Insurance law bores some, but it is one area in modern society where a 1 in 100 insured event like a flood, escape of water, cyclone, major storm can be life changing financially!

If you claim when ‘sh$t hits the fan’ and you get delay and denial on top of the problem you will know how debilitating this can be.

I experience this day in day out with clients. Less so when brokers are involved but even then I see problems but for Mum and Dad home policies - oh - insurers are getting worse and they don’t really seem to care.

It isn’t so obviously wrongful conduct or as blunt or opaque as you may think. I see it in delay when people’s lives are upside down and I see insurers obtain a so called ‘expert report’ from a preferred builder or other consultant and without any rigour of independence. The report finding it’s way to directly support a denial. The insurer then stands anchored behind the findings.

I don’t think insurers fear AFCA…why would they, they can hide behind expert reports and anchor their position and knowing AFCA has little rigour around expert evidence. And reputational risk - they are little concerned, they have evidence in their favour…

And here is the biggest con of all - The General Insurance Code of Practice

This is not a legal document that can be enforced by lawyers for consumers…

For those who don’t know, the General Insurance Code of Practice sounds like something binding. You might even imagine it’s a shield standing between you and the big bad insurers. It effectively gives you zero legal effect.

Let’s break it down.

The Code is a set of standards that insurance companies subscribe to… through the Insurance Council of Australia. That’s right. It’s self-regulation.

Here’s what the Code doesn’t do:

• It doesn’t create legal rights for consumers and allow you to sue when it’s breached.
• It doesn’t create real accountability.
• And it definitely doesn’t stop insurers from playing hardball.

What it does do is give the industry a shiny badge to wave and say, “Look, we’re doing this!”

Now, don’t get me wrong — guidance and best practice is helpful. But when an industry as powerful as the insurance industry gets to set its own standard and with no cause of action for breach, that’s not protection. That’s PR.

So why does this matter? Because real consumer protection shouldn’t be optional. It should be backed by law and enforceable.

Until then, the Code remains a well-dressed decoy, diverting attention from the real issue — a lack of meaningful oversight in a sector that affects millions of Australians.

The next time someone tells you about the Code, just smile and ask: ‘but what benefit does it provide when broken?‘

Let’s keep pushing for real reform…

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• regulatory compliance
• insurance law