General Insurance Code Compliance Committee

General Insurance

Code of Practice

Annual Report of the Code

Compliance Committee

2012 - 2013

Table of Contents

About the Committee 3

Membership of the Committee 3

The Committee’s functions 3

Executive Overview 4

Chair’s Message 5

1. Introduction 7

2. Performance against the Committee’s Deed Obligations 8

Table 1: Committee Meeting Attendance Record 8

3. FOS Code Reports to the Committee 9

3.1 Overall Breach Numbers 9

3.2 Types and Frequency of Breaches 10

3.3 Code Compliance Reviews (Desk Top Audits) 10

3.4 Breaches by source 11

3.5 Breach cause and corrective action 11

3.6 Significant Breach Reports 11

Table 2: Summary of FOS Code Significant Breach Reports during 2012-2013 12

4. Determinations and Sanctions 15

5. Other Matters 16

5.1 Primary Code Compliance Issues 16

Table 3: Top 10 Code Compliance Checklist 16

5.1.1 IDR / EDR Risks 17

5.1.2 Use of Templates Precedents and Document Management 17

5.1.3 Failure to follow internal process 17

5.1.4 Importance of Training 18

5.1.5 Outsourcing Risks and Service providers 18

5.1.6 Identification and Reporting of Significant Code Breaches 19

5.1.7 Access to information used to support a denial decision 19

5.1.8 IT and Systems failures 19

5.2 The Committee’s Role in the Independent Code Review 20

5.3 Changes to the Annual Compliance Review Program 21

5.4 Key Performance Indicators of the Committee 22

6. Complaints about the Committee 22

7. Code Participants 22

8. Conclusion 22

Schedule 1 - Members of the Committee 2012-2013 24

Schedule 2 - Aggregated Breach Data for Year Ending 30 June 2013 26

Schedule 3 – GICCC Submission to the Independent Review of the General Insurance

Code of Practice 49

Schedule 4 - KPI Report for the period 1 July 2012 to 30 June 2013 61

Schedule 5 - List of Code Participants as at 30 June 2013 66

Gi Ccc Annual Report 2012_2013 Final View Page 3 of 70

About the Committee

Membership of the Committee

The Code Compliance Committee (the Committee) is an independent Committee which oversees

the compliance of Code Participants with their obligations under the 2006 General Insurance Code

of Practice (the Code).

The Committee is comprised of:

(a) a consumer representative appointed by, and not a member of, the board of the Financial Ombudsman Service (FOS);

(b) an industry representative appointed by, and not a member of, the board of the Insurance

Council of Australia (ICA); and (c) an independent chair jointly appointed by, but not a member of either of the boards of ICA or

FOS.

Schedule 1 to this Report provides further biographical detail about the members (and alternate

members) of the Committee during the reporting period. The current Committee members are

Michael Gill (Independent Chair), John Anning (Industry Representative) and Julie Maron

(Consumer Representative).

On 1 July 2012 Julie Maron replaced Peter Gartlan as the consumer representative on the

Committee. Peter Gartlan is now the alternative consumer representative on the Committee.

The Committee’s functions

The Committee has a number of specific functions under the Code, including to:

consider quarterly aggregated breach data provided to it by the Code Compliance and

Monitoring team of FOS (FOS Code);

monitor Code compliance through reports received from FOS Code;

make determinations and impose sanctions where FOS Code has reported a failure by a

Code Participant to correct a Code breach;

identify serious, or systemic, issues with regard to the Code or its application; and

subject to privacy law, to report back to FOS on any findings or determinations made by the

Committee as a result of data provided by FOS Code.

The Committee is supported by a secretary, Dr June Smith and works closely with the FOS Code

team, which amongst other services to the Committee, provides quarterly aggregated breach data

reports of its Code monitoring activities for the Committee’s consideration.


Executive Overview

The Committee received four quarterly aggregated breach data reports from FOS Code

during the reporting period, concerning Code Participant compliance with Code obligations.

These reports identified 78 breaches of the Code by Code Participants. This does not include

instances of non-compliance with Code obligations which are self reported separately to FOS

Code and remedied by Code Participants. In 2011-12 there were 2724 such breaches.

The Committee also considered the outcomes of 37 desk top audits completed by FOS Code

during 2012-2013.

The Committee received a further 12 reports from FOS Code about matters involving a

significant breach of the Code. These breaches and the corrective action taken by Code

Participants are located in Table 2 on page 13.

The significant breach matters considered by the Committee during the reporting period

affected 188,086 customers. Total payments of $1,543,918 were made by Code Participants

to these affected customers as a result of this non-compliance.

Significant breach reports have increased strongly during this reporting year from three

reports in 2011-2012. In part, this can be attributed to the increased self reporting by Code

Participants (seven matters in 2012-2013).

On page 16 of this Report, the Committee has provided a checklist of the factors it usually

takes into account when assessing the significant breach data provided by FOS Code.

In this reporting year, 78% (61) of the breaches finalised by FOS Code involved non-

compliance with the Code’s claims handling standards. Non-compliance with the new

standards in part (b) of section 3.5.5 was the source of 31% (24) of claims handling

breaches. This activity is discussed on pages 10 to 13.

In table 3 on page 17, the Committee has identified nine additional areas for industry

improvement. These areas include:

o Provision of correct information to consumers about their dispute resolution rights;

o The use of up-to-date template documents and document management;

o The important of adherence to internal processes and procedures;

o Ensuring and checking that diligence processes are working effectively;

o The effectiveness of training on Code obligations and their application;

o Adequate monitoring and training of Service Providers;

o The effectiveness of Code breach identification and reporting systems;

o Ensuring consumer access to relevant information about reasons for denying claims;

and

o Reviewing outcomes of IT and systems failures to identify breaches of Code

obligations that may have occurred.


Chair’s Message

This is my final report as Independent Chair of the Code Compliance Committee. I was first

appointed to this role in 1994. During my time as Chair, I have witnessed many changes to the

Code itself and to the level of engagement and commitment by all stakeholders to the self

regulatory framework the Code establishes.

This year the Committee has had the opportunity to reflect on progress made and areas for

improvement during its deliberations and during its engagement with the Independent Review of

the Code undertaken by Ian Enright. The Committee was most grateful for this opportunity. These

reflections form a major part of this Annual Report as the industry prepares to transition to a

revised Code of Practice in 2014.

The Committee saw the independent review of the Code as an important opportunity to consider,

reflect and discuss the Code’s operation over previous years. Unlike previous reviews, on this

occasion the Committee took a broad view about the ambit of its submission. Our submission to

the review is published in this Report as Schedule 3.

In particular, one of the key themes identified by the Committee in its submission was the

importance of transparency at all levels of the Code’s operations, to the achievement of the Code’s

objectives. To achieve this, the Committee believes the revised Code should outline clear

responsibilities for the promotion of the Code, its obligations and accountabilities to all

stakeholders.

The Committee also supports the proposal to develop general guidance for industry and

consumers about the interpretation and application of the Code’s obligations in practice. This may

assist in ensuring a consistent understanding across stakeholders to the revised Code’s operation

and its application.

In addition, the Committee has again requested that the Code and the Committee’s Charter be

amended to allow FOS Code to disclose the identity of any Code Participant which is the subject of

a significant breach report and to formally recognise the Committee’s ability to publish reports on

its Code compliance activities.

In keeping with this transparency theme, in this year’s Report, the Committee has outlined the

types of factors that it takes into account when considering the Code compliance data provided to it

by FOS Code and has shared some insight into areas for possible industry improvement as Code

Participants transition to a revised Code.

Finally, but most importantly, I would like to thank my fellow Committee members, Julie Maron and

John Anning for their commitment and support to me personally as Chair and for the work of the

Code. It is appropriate in this message to re-state previously expressed thanks to all

representatives of the industry and consumer advocates who have served with me over the past

19 years.

To June Smith and the other staff of FOS Code, especially Rose-Marie Galea, my thanks once

again for all of your work and commitment to this important aspect of the insurance industry’s

service to its clients and others in Australia. Again I extend my thanks to many others who have

assisted on this journey.


Finally, I wish the Code well for the future; those good wishes extend to the incoming Chair and the

Committee who will work under an exciting new structure.

My work as an insurance lawyer has given me the benefit to see at first hand the way in which the

insurance industry operates in many parts of the world and the role which self regulatory codes

play. The Australian General Insurance Code of Practice is a leader in this area; without being

complacent the industry and those who work alongside it have much to be proud of in what has

been accomplished thus far.

Michael Gill

Independent Chair


1. Introduction

This is the sixth Annual Report of the Committee under the Code. The Report is prepared in

accordance with Clause 6.3 of the Deed of Adoption (the Deed) and Clause 10 of the Code

Compliance Committee Charter (the Charter).

This Annual Report covers the period 1 July 2012 to 30 June 2013 (the reporting period) and

outlines the Committee’s activities during that time and its consideration of matters related to Code

Participant compliance with the Code’s obligations.

On 1 July 2012, amendments to the 2006 Code came into effect. This Report therefore refers to

activities undertaken by Code Participants under the revised 2006 Code (which covered all

insurance contracts, policies and new claims received by Code Participants after that date.)

The Committee’s analysis of Code compliance data outlined in this Report needs to begin with,

and be seen in the context of, a clear statement about the relevant activity of the general insurance

industry in the reporting period. The Committee refers to the most recent industry data, which is

outlined in FOS’s General Insurance Code of Practice Overview for the Year 2011–2012 as a

guide. This data indicates that in 2011-2012:

39,007,318 policies were written by the 151 Code Participants;

Consumers and businesses lodged 3,865,984 insurance claims with those participants;

A total of 3% of claims were declined1 by Code Participants, amounting to 97,118 general

insurance claims;

Customers also withdrew at least 120,573 claims during the same period or approximately

3% of the total claims lodged;

Code Participants internally reviewed 28,400 disputes across both commercial and personal

lines of insurance business; and

Code Participants also self-identified, reported and remedied 2,724 instances of non-

compliance with the Code (these breaches of the Code do not form part of the analysis

outlined in this Report given they were reported in 2011-2012).

This Report highlights the Committee’s:

(a) achievement against our Deed obligations during the reporting period (see section 2);

(b) assessment of the annual Code breach and compliance review data provided to us by FOS

Code (section 3);

(c) experience and views about a range of Code compliance issues that have arisen during the

year, together with our recommendations for industry improvement (section 5.1);

(d) role in the independent review of the Code (section 5.2);

(e) reflection on the implementation of the significant changes to the Annual Code Compliance

Review Program undertaken by FOS Code (section 5.3); and the

(f) successful performance against key indicators during the reporting period (section 5.4).

1 Some Code Participants included data about withdrawn claims and partially accepted claims in declined claims data

reported to FOS.


2. Performance against the Committee’s Deed Obligations

In accordance with Clause 6.4 of the Deed, the Committee is pleased to report that in 2012-2013

we complied with the terms of our Charter and the Deed. We made two recommendations to the

Independent Review of the Code that our Charter be altered as follows:

(a) The Committee be given the power to publish reports about its Code compliance activities

and Code Participant compliance with the Code, including this Annual Report; and

(b) The current restriction on FOS Code from disclosing to the Committee the identity of any

Code Participant which is the subject of a significant breach report.

The decision of the ICA Board to publish the Committee’s 2011-2012 Annual Report in full on the

ICA website was particularly pleasing. The Committee believes that this decision led to increased

transparency about the role and findings of the Committee in 2011-2012 and the Code monitoring

framework overall. It is our desire that this Annual Report should be similarly published.

We are also hopeful that our Charter will be amended in the near future to formally recognise our

ability to independently publish reports on our Code compliance activities. We note that the

Independent Reviewer of the Code supported this recommendation in his final report.

The Committee met six times during the reporting period on 26 July 2012, 23 October 2012, 16

November 2012, 15 January 2013, 5 February 2013 and 28 May 2013. The following table sets out

the attendance record of all members.

Table 1: Committee Meeting Attendance Record

Code Compliance Committee Member

Attendance Record

Actual Attendance Eligible to Attend

Chair - Michael Gill 6 meetings 6 meetings

Consumer Representative - Julie Maron 5 meetings 6 meetings

Industry Representative - John Anning 6 meetings 6 meetings

Alternate Consumer Representative -

Peter Gartlan 1 meeting 1 meeting


As identified in section 3 of this report:

The Committee received four quarterly aggregated breach data reports from FOS Code

during the reporting period, concerning Code Participant compliance with Code obligations.

These reports identified 78 breaches of the Code. The Committee also considered the

outcomes of 37 desk top audits conducted by FOS during 2012-2013.

The Committee received a further 10 reports from FOS Code about matters involving a

significant breach of the Code. A summary of each significant breach report presented to the

Committee and the Committee’s comments on outcomes and breach rectification are

outlined in section 3.6 and Table 2. Further details can also be found in the FOS Aggregated

Breach Data Report for the year ending 30 June 2013, in Schedule 2.

FOS Code was able to reach agreement with all relevant Code Participants about corrective

action to be taken to rectify those significant breaches.

The Committee also received reports from FOS Code in relation to two other significant

breach matters, carried over from the previous year (2011 – 2012).

These significant breaches impacted 188,086 customers who received payments totalling

$1,543,918 from relevant Code Participants.

3. FOS Code Reports to the Committee

3.1 Overall Breach Numbers

In accordance with obligations pursuant to sections 7.9 and 7.16 of the Code, the Committee

considered the quarterly reports from FOS Code at meetings conducted on 23 October 2012

(Quarter 1), 5 February 2013 (Quarter 2), 28 May 2013 (Quarter 3) and 14 August 2013 (Quarter

4).

In particular, the Committee considered whether the data enabled it to:

identify serious or significant issues of industry and/or individual non-compliance with the

Code or its application;

better monitor Code compliance; and

identify recommendations for industry improvement.

The 2012-2013 Annual Breach Data Report of FOS Code amalgamates the data from all four

quarterly reports received by the Committee during the reporting period. The FOS Code Report is

attached at Schedule 2.

The major Code compliance issues identified by the Committee from these reports are outlined in

section 5.1 of this Report.

In summary, FOS Code recorded 78 breaches as finalised during the reporting period. A total of 61

of these breaches related to the claims handling standards in section 3 of the Code. The remaining

17 breaches consisted of four breaches of section 2 (buying of insurance products) and 13

breaches of section 6 (complaints handling standards).

The Committee has worked constructively with FOS Code during the reporting period on the nature

and type of statistical information exchanged for the Committee’s assessment.

Enhancements have been made during the course of the year with FOS Code agreeing to provide:


1. a 12 month breach history for every Code Participant that had a breach (or breaches) in a

particular quarter;

2. a report on the number of consumers affected by a Code breach which was identified by

FOS Code during a desk top audit; and

3. the number of breach allegation referrals received from Community Legal Centres during the

quarter.

In addition, FOS Code has independently enhanced data reporting by:

1. consolidating breach causes and corrective actions into one table for the Committee’s

consideration;

2. highlighting in data tables breach figures that apply to significant breaches; and

3. providing the number of breach allegation referrals received from Financial Counsellors.

3.2 Types and Frequency of Breaches

This year 78% (61) of the breaches finalised by FOS Code involved non-compliance with the

Code’s claims handling standards. Non-compliance with the new standards in part (b) of section

3.5.5 was the source of 31% (24) of all claims handling breaches.

The standards of section 3.5.5 define the method of communication and content of claim denials.

They outline the nature of the information which must be included when informing customers in

writing that their claims have been denied. The changes, which became effective on 1 July 2012,

require a Code Participant to notify a consumer about their right to:

Ask for copies of information which the Code Participant relied on in denying the claim; and

To request a review of any decision to refuse to release such information.

3.3 Code Compliance Reviews (Desk Top Audits)

The practice of conducting Code reviews using desk top audits in place of on-site visits was

introduced in 2010 and forms a major part of the revised compliance monitoring framework

implemented by FOS Code from 1 July 2012. The implementation of this revised framework is

outlined in more detail in section 5.3 of this report.

Between 1 July 2012 and 30 June 2013, FOS Code reported to the Committee that it had

completed 37 annual Code compliance reviews (desk top audits) of Code Participants. A total of 35

of these Code Participants were able to demonstrate to FOS Code’s satisfaction that they had

effective Code compliance and monitoring frameworks in place. FOS Code identified two Code

Participants that did not comply with some aspects of the Code, resulting in 11 breaches being

recorded.

The predominant issue identified from these reviews was also non-compliance with the new

standards outlined in section 3.5.5(b) of the Code introduced in July 2012. This accounted for 10 of

the 11 breaches recorded.

FOS Code concluded that these breaches were not significant in nature. It reached agreement with

the Code Participants about the corrective action to be taken to remedy the non-compliance with

the Code. In each instance, FOS Code reported that it was satisfied that the corrective action was

implemented appropriately and had addressed the non-compliance.


3.4 Breaches by source

Consumer advocate referrals are very important to the effective operation of any self regulatory

framework by Code Participant employees, authorised representatives and service providers.

This year referrals from community legal centres, for example, led to the identification of 21 of the

78 breaches recorded, up from nine breaches in 2011-2012.

The Committee believes that the training undertaken by FOS Code with consumer advocates

during the reporting period to raise awareness of consumer rights under the Code may have

contributed to the increased number of referrals from consumer advocates alleging a breach of the

Code which was received during the reporting period.

3.5 Breach cause and corrective action

In relation to the causes of non-compliance with the Code’s obligations, a failure to adhere to

internal processes has remained the predominant cause of non-compliance during the reporting

period. This year, 41 (53%) of the 78 breaches and more than half of claims handling breaches

were associated with a failure to adhere to processes. Similarly eight of the 13 breaches recorded

against the complaints handling standards were due to a failure to apply an established process.

The Committee discusses these matters in detail later in this Report but notes that the commercial

ramifications of a failure to follow process can be substantial.

3.6 Significant Breach Reports

FOS Code is currently restrained from identifying any Code Participant that is the subject of a

significant breach report to the Committee. FOS Code has adopted the use of a unique identifier

for this purpose. The Committee maintains the view that the identification of the relevant Code

Participant in these circumstances is important to our work and to the effective discharge of our

functions.

The Committee has raised this matter with the Independent Code Reviewer. A copy of the

Committee’s submission to the Independent Code Review is attached as Schedule 3 of this

Report. The Committee recognises the importance of transparency at all levels of the Code’s

operations to the achievement of the Code’s objectives. To this end, the Committee has requested

that both the Code and the Committee’s Charter be amended to allow FOS Code to name Code

Participants that are the subject of a significant breach report to the Committee.

We accept there should be a corresponding obligation on the Committee to keep this information

confidential, unless exercising the Committee’s existing power to name a Code Participant under

section 7.22 of the Code.

As reported earlier, FOS Code dealt with 12 significant breach matters in 2012-2013. Seven

significant breach matters have been closed while the remaining five matters were open as at 30

June 2013. In total, 188,086 consumers were impacted by these significant breach matters. Total

payments to these affected consumers amounted to $1,543,918.00.

A summary of each of the significant breach matters reported to the Committee is provided in

Schedule 2 of this report. Table 2 below provides a summary of these breaches by reference to

the Code Participant (de-identified); relevant code section; nature of breach; consumer impact and

corrective actions taken.


Table 2: Summary of FOS Code Significant Breach Reports during 2012-2013

Report # & Code Participant (CP)

Code Section

Identified By

Nature of Significant Breach and Consumer Impact

Number of Affected Consumers

Payments to Affected Consumers

Other corrective actions taken by Code Participant

Status

Report 1, CP 7

3.7.1 FOS Code

Misinterpretation of policy wording by a Service Provider resulted in a shortfall in payments to consumers for loss of rent claims.

197 $57,789 (including interest)

Clarified application of policy wording with Service Provider.

Counselled and re-trained relevant staff.

Closed

Report 2, CP 72

3.1, 3.2.1(a) & (c) & 3.3

CP

A Service Provider was unable to process and determine some travel insurance claims within the relevant timeframes, due to an unexpected increase in claims and call volumes.

6,380 Not applicable

Daily monitoring of claims handling timeframes.

Audited a sample of randomly selected files.

Negotiated alternative timeframes with customers where appropriate.

Recruited and trained additional staff.

Closed

Report 3, CP 37

3.7.1 CP

Claims consultants failed to provide customers with a refund of excess paid on comprehensive motor vehicle insurance claims, following a decision to change the claim status from “at fault” to “not at fault”.

1,657 $153,334 (including interest)

System changes to improve the excess refund process.

Enhancement of internal risk controls.

Closed

Report 4, CP 75

3.2.3 & 3.5.1

CP Processing of some travel insurance claims was delayed, due to a gap in a claims administration system.

755 Not applicable

Customers were advised of the information that was required to complete claims processing.

Implementation of system changes and improved claims monitoring.

Closed

Report 5, CP 132

2.1.4 & 2.4.5

FOS Code

Inadequate training and failure to monitor Authorised Representatives in relation to a new policy process led to failure to forward new Product Disclosure Statements (PDSs) to a number of customers, after a change of cover.

4,574 Not applicable

New PDSs were provided to customers.

Automated solution developed.

Improved monitoring of Authorised Representatives.

Amended the breach management policy to ensure breach deliberations are fully documented.

Closed


Report 6, CP 132

2.1.4 FOS Code

Inadequate monitoring of a new policy administration system resulted in various customers with comprehensive motor vehicle policies being charged an incorrect premium on renewal, contrary to policy terms and other consumer publications.

6,651 $644,892

Rectified the technical fault in the policy system.

Audited the policy system to ensure that effectiveness.

Introduced monthly monitoring of the system’s operation to prevent recurrence.

Open

Report 7, CP 57

2.1.4 FOS Code

Customers who held home insurance cover were charged an incorrect premium on policy renewal, contrary to policy terms and other consumer publications. Unclear and inconsistent consumer information about the available discounts contributed to the confusion. The CP’s breach committee identified this matter as a breach of its licensee obligations under the Corporations Act 2001 but did not consider whether there was also a breach of Code obligations.


Reviewed all disclosure documents to ensure consistency of information about available discounts.

Enhanced breach incident management procedures.

Closed

Report 8, CP 68

2.1.4 FOS Code

An incorrect premium was charged on renewal of a number of home insurance policies contrary to policy terms and other consumer publications. The CP reported this matter to ASIC but did not adequately consider whether the matter had also breached the Code.


Amended the breach committee’s processes to ensure that it considers matters from a Code perspective.

Closed

Report 9, CP 97

3.1, 3.2.1(a) & (c) & 3.2.5

CP

Delays occurred in processing some travel insurance claims, including whether to accept or deny a claim in some instances, due to an unexpected increase in claims volume. The delays were not reported to the CP’s risk and compliance area for several months.

2700 Under assessment

Affected claims were brought within the relevant Code timeframes.

Recruited additional claims staff.

Secondment of staff from other teams.

Enhanced monitoring of claims team activities by compliance and quality assurance areas.

Open


Report 10, CP 117

6.1.2 CP

A legal firm used by a Service Provider incorrectly informed a consumer that if negotiations to settle a strata insurance claim failed, the CP’s complaints handling procedures would not be available to the consumer.

1 Not applicable.

The consumer was correctly advised of the availability of complaints handling procedures.

Remedial action taken within the legal firm.

New files handled by the legal firm audited for several months.

Open

Report 11, CP 167

2.4.5, 2.4.6(a), 2.4.6(c) & 2.4.8(a)

CP

Failure to provide an Authorised Representative with relevant Code, insurance and legal training and failure to monitor their performance. A four month delay occurred between the date the issue was identified and confirmation that it was a significant breach by its Breach Committee.

0

Not applicable

Reviewed records to ensure that there were no additional compliance breaches or complaints about the Authorised Representative.

Reviewed the products sold by the Authorised Representative which showed that all transactions had occurred within the scope of its authority.

Open

Report 12, CP 128

3.1 & 3.2.5

CP

Delays occurred in determining liability in relation to Home insurance claims, due to delays in actioning incoming customer correspondence.

9,330 Under assessment

Increased staff numbers.

Revision of operating model, which has improved efficiency and increased capacity.

Establishment of a quick settlement and finalisation process focusing on prompt settlement of small claims with minimal evidentiary requirements.

Open

Total number of consumers affected: 188,086. Total payments to affected consumers: $1,543,918


The following list provides some guidance to stakeholders about the typical factors the

Committee considers when assessing these significant breach reports:

4. Determinations and Sanctions

One of the functions of the Committee is to make determinations and impose sanctions

where FOS has reported a failure by a Code Participant to correct a breach of the Code.

The Committee received no reports from FOS Code during the reporting period that a

Code Participant had failed to correct a Code breach. Accordingly, the Committee was not

called upon to make a determination and impose sanctions under section 7.14(b) of the

Code.

1. The nature of the significant breach and its duration.

2. Was there any consumer detriment, its nature and extent and how the detriment was

established?

3. Was FOS Code satisfied that the Code Participant had identified the significant

breach and reported it within the required 10 business days?

4. Were there any delays in the Code Participant’s identification of the incident/s as an

issue or assessment of whether the issue was a significant breach of the Code?

5. Whether the factors that led to the breach may have additionally led to other separate

instances of non-compliance with Code obligations.

6. The effectiveness of the Code Participant’s procedures for assessing whether an

issue amounted to a significant breach of the Code, including whether its deliberations

were documented.

7. Whether the issue giving rise to the significant Code breach had also been reported to

ASIC as a significant breach of the Code Participant’s Australian Financial Services

Licence.

8. If the significant breach was identified by FOS Code, the reason why the Code

Participant failed to identify it.

9. The relevant compliance history of the Code Participant and whether similar breaches

had occurred previously.

10. The method used by the Code Participant to establish the impact of the significant

breach, including whether there were limitations that prevented it from determining the

exact number of breaches and/or affected consumers.

11. Whether FOS EDR has received any complaints from consumers arising from the

significant breach matter.

12. The Code Participant’s arrangements to ensure compliance with the Code.

13. The effectiveness of the Code Participant’s breach and incident reporting and

management system.

14. The nature of the corrective action proposed and timeframes for completion.

15. Whether there were any other factors that FOS Code considered relevant to the

significant breach.


5. Other Matters

The Committee has the opportunity pursuant to clause 6.4 of the Deed to include such

other matters as we may determine in its Annual Report. The following matters fall within

that category. The Committee has identified several areas of emerging Code compliance

risk during the reporting period. We seek to share our experience of those issues with

industry and make some suggestions for improved industry practice.

5.1 Primary Code Compliance Issues

The Committee has identified a list of the 10 primary compliance issues that it dealt with

during the reporting period. We summarise our experience of each issue and our

suggestions for good industry practice in no particular order in Table 3 below.

Table 3: Top 10 Code Compliance Checklist

No Issue

Comment

1. IDR/EDR rights Advice to consumers about IDR/EDR rights needs to be accurate, both from staff, authorised representatives and service providers.

2. Template use When organisational, process or systems changes are made, ensure all templates have been updated to reflect the changes.

3. Document management

Ensure old templates are removed from circulation so there is no risk of the wrong template being used. To reduce the likelihood of employees using non-compliant precedents, internal risk management should ensure that precedent documents are only available from one secure location and cannot be copied to personal computer drives.

4. Internal

processes

Failure to adhere to existing internal processes remains a major source of Code breach activity. Code Participants should review their monitoring systems and check the effectiveness of staff and refresher training programs. Monitoring adherence to new processes is also important.

5. Diligence

processes Code Participants need to adequately identify and address any gaps or omissions in consumer marketing and disclosure documents.

6. Code training Check the adequacy of the Code training program and whether training is being applied properly in practice.

7. Service

providers It is very important to monitor service providers and ensure that they understand Code obligations and complaint handling procedures.

8. Breach

Reporting

Breach identification and reporting processes/systems should require that consideration must be given to whether all matters reported to ASIC may also constitute a breach of Code obligations.

9.

Access to information used to support a denial decision

Non-compliance with the new standards outlined in section 3.5.5(b) of the Code accounted for a number of breaches recorded. Section 3.5.5 outlines the nature of the information that must be included when informing a customer in writing that their claim has been denied and should be adhered to.

10. IT or systems

failure

Be careful of concluding that an issue is merely an IT or systems failure without considering whether there are Code breaches associated with diligence, governance, compliance or monitoring frameworks and the consumer impact that may apply to those matters.


We encourage Code Participants to consider and address these issues where appropriate

within their organisations and/or use the table as a checklist to aid compliance when

transitioning to the revised Code.

To assist with stakeholder understanding of these issues, the Committee makes the

following additional comments on these underlying causes of Code non-compliance.

5.1.1 IDR / EDR Risks

Code Participants must comply with their obligations to conduct complaints handling in a

fair, transparent and timely manner. The provision of accurate information to consumers

about complaints handling procedures and access to internal and external dispute

resolution is pivotal to this compliance.

This obligation extends to service providers and third parties such as law firms, to whom

claims handling and dispute resolution may be outsourced.

Problems usually arise because of human error (such as the use of out of date template

letters, misunderstandings about the time limits and process that may apply to dispute

resolution (which may be associated with training and supervision) and inaccurate

information provided to consumers about the transition from internal to external dispute

resolution. These types of Code compliance issues arise regularly. The Committee

encourages all Code Participants to review their monitoring of the IDR/EDR Code

obligations within their organisations as they transition to the revised Code to reduce the

risks associated with these types of non-compliance.

5.1.2 Use of Templates, Precedents and Document Management

The use of old, outdated or incorrect templates by Code Participant staff or authorised

representatives was another theme of this year’s data. The Committee stresses the

importance of processes and systems to check and monitor use of template documents

and letters.

The Committee understands that FOS Code has addressed the importance of updating

template documents, processes and procedures to maintain compliance, with the ICA

Code Reference Group.

There were many instances during the reporting period however of the use of non-

compliant templates by a Code Participant. Remedial action undertaken by Code

Participants to remedy Code breach activity included the removal of the old templates

from its systems on many occasions.

In this sense technology could play an enhanced role in achieving and maintaining

compliance. To reduce the likelihood of employees using non-compliant precedents,

internal risk management should ensure that precedent documents are only available

from one secure location and cannot be copied to personal computer drives.

5.1.3 Failure to follow internal process

The failure of staff, authorised representatives and service providers to adhere to existing

internal processes remains a major source of Code breach activity. These simple human

errors can lead to a significant operational and consumer impact.


In addition, in any given year Code Participants are likely to introduce new template

documents, processes and procedures within their commercial operations. In these

circumstances it is important that Code Participants understand the risk that staff will

revert to old practice or use out of date templates which may not reflect current practice

and Code obligations. We encourage Code Participants to review their monitoring

systems and check the effectiveness of staff and refresher training programs when they

implement such changes in their workplace. Monitoring adherence to new processes is

also important to identify and address the underlying cause.

5.1.4 Importance of Training

Whilst the training of employees and authorised representatives should emphasise

technical compliance with the Code, it is important to ensure it also results in a real

understanding of the Code’s objectives and the application of Code obligations in

practice.

To achieve this outcome we suggest that Code Participants review their training content

to ensure that each module, irrespective of subject matter, includes reference to relevant

Code obligations.

In 2013-2014 FOS Code will examine the effectiveness of Code training by Code

Participants as part of its desk top audit program.

5.1.5 Outsourcing Risks and Service providers

Two of the significant breaches raised with the Committee again raised shortcomings in

Code compliance frameworks and Service Providers. The Committee repeats its previous

advice about the effective management of contracts with Service Providers. Code

Participants will be held accountable for the conduct of their Service Providers and are

required to monitor their compliance with the Code’s obligations. We suggest the

implementation of measures to ensure that:

the Service Provider has appropriate systems and processes in place to enable it

and the Code Participant to monitor its compliance with the Code;

protocols are established so that the Service Provider understands the

circumstances in which it will be required to report to the Code Participant, and the

timeframes for such communications, when the Service Provider detects either a

gap in Code compliance or a potential Code breach or actual Code breach;

the Code Participant has appropriate resources, systems and processes in place to

enable it to monitor the Service Provider’s compliance with the Code. This includes

regularly auditing the Service Provider to independently determine whether the

Service Provider is complying with the Code’s claims handling standards;

the Service Provider is clearly aware that the Code Participant has adopted the

Code and as a result, it is also bound by the Code’s claims handling service

standards;

the Service Provider understands the specific claims handling standards that apply

to it when handling claims on behalf of the Code Participant;

the Service Provider is clearly aware of the Code Participant’s complaints handling

procedures, including the process for referring complaints relating to or received by

the Service Provider when acting on behalf of the Code Participant;


the Service Provider has a process for recording complaints relating to or received

by it when acting on behalf of the Code Participant for referring complaints to the

Code Participant immediately (or at least within 24 hours); for recording that the

complaint has been referred to the Code Participant; and that the consumer is

aware that their complaint has been referred to the Code Participant; and

the Service Provider is clearly aware of the consequences that arise from non-

compliance with the Code.

The Committee considers that these aspects of the Service Provider’s relationship with

the Code Participant are probably best addressed through a Service Level Agreement,

executed by the Code Participant and the Service Provider.

5.1.6 Identification and Reporting of Significant Code Breaches

Under Section 7.3 of the Code, Code Participants have a responsibility to identify and

report any significant breach of the Code to the FOS Code team within 10 business days.

Code Participants are also expected to have appropriate systems and processes to

enable effective monitoring of their compliance with Code obligations and an internal

governance process which allows for internal reporting.

Disappointingly, the Committee identified a number of instances during the reporting

period where a Code Participant, having notified AISC of a significant breach of its

licensing conditions, had not adequately assessed whether the same issues also

constituted non-compliance with Code obligations. In each case the Committee agreed

with the view formed by FOS Code that a significant breach of the Code had also

occurred.

Whilst not all breaches of the law will automatically result in a breach of Code obligations,

a Code Participant must consider whether a Code breach has occurred and whether a

report should be made to FOS Code.

5.1.7 Access to information used to support a denial decision

Section 3.5.5 commenced on 1 July 2012. It outlines the nature of the information that

must be included when informing a customer in writing that their claim has been denied.

Non-compliance with the new standards outlined in section 3.5.5(b) of the Code

accounted for a number of breaches during the reporting year. In our experience some of

this non-compliance was caused by either a failure to update the template letters used by

Code Participants to communicate claim denials to consumers, or by a failure of staff and

agents to use the updated templates and processes.

This section of the Code was an important outcome of the 2010-2011 Queensland Floods

inquiries. We therefore encourage Code Participants to actively monitor their compliance

with this provision in 2013-14 to reduce the levels of non-compliance with this standard.

5.1.8 IT and Systems failures

The introduction of new technology, systems and IT within commercial organisations has

led to significant efficiencies. It can also have a significant impact on consumers when an

error occurs or when a system change occurs in seeming isolation to other existing

processes and procedures.


In the Committee’s experience, organisations that handle IT or systems changes

effectively are those that understand that corresponding changes must occur to other

linked processes and procedures and that active use of diligence, governance and

monitoring frameworks will ensure consistency and reduce the impact of a systems error,

if it occurs.

When considering the impact of an IT or systems failure, the Committee will also assess

whether there were any associated issues with the diligence, governance, compliance or

monitoring frameworks of the Code Participant that may have contributed to the extent,

impact or duration of the breach. The effectiveness of the Code Participant’s breach and

incident reporting and management system will play a large role in its ability to isolate root

causes in these instances.

5.2 The Committee’s Role in the Independent Code Review

The Committee is grateful to the Independent Code Reviewer, Ian Enright, for the

opportunities he provided to us to participate in the Code review and the obvious diligence

he brought to the task. This was well demonstrated by the extent to which he sought

clarification on many issues.

The Committee believes that the independent review of the Code in this reporting year

was an important opportunity to consider, reflect and discuss the Code’s operation over

previous years. The Committee consulted with the Independent Code Reviewer in a

broad and co-operative fashion.

The Committee’s submission to the Independent Reviewer is attached to this Report as

Schedule 3. As outlined in the submission, the Committee shared its broad experience in

Code monitoring and in the operations of the Code, as they applied to the Terms of

Reference and the Issues Paper of the Independent Reviewer, released in September

2012.

This included issues such as:

(a) Code publicity, awareness and engagement;

(b) Code content, presentation and style;

(c) Code coverage;

(d) Principles, objectives and legal status of the Code;

(e) Code training and education;

(f) Code monitoring and investigation;

(g) Code enforcement and sanctions; and

(h) Code Governance and the Committee’s functions, powers and jurisdiction.

We have referred to a number of the recommendations made by us in our submission

in this Report. There is one other area of importance which we wish to highlight here.

In monitoring compliance with the Code over the last few years, the Committee has

identified instances of non-compliance with the Code’s obligations concerning dealing

with customers and uninsured third parties who may be in financial hardship.


The Committee believes that all Code Participants should have rigorous processes in

place to assist persons who may be experiencing financial difficulty. We believe that

this area of obligation is intrinsically linked to one of the core objectives of the Code

concerning insurer – customer relationships. How an insurer deals with customers in

financial difficulty in terms of fairness and compassion is seen as very important to the

achievement of the Code’s objectives and goes to the heart of its effectiveness. Many

people often judge the industry by how compassionately and fairly it deals with the

most vulnerable and disadvantaged members of the community.

The Committee also recommended to the Independent Reviewer that Code

Participants recognise the importance of the content, language and delivery of financial

hardship training to their employees in relation to third party debt and motor vehicle

claims and review it if necessary.

The Committee also supports the development of guidance for dealing with hardship cases, the criteria for hardship and available outcomes.

5.3 Changes to the Annual Compliance Review Program

From 1 July 2012, the Code compliance monitoring program undertaken by FOS Code

was modified, in consultation with the ICA.

Under the new framework, each Code Participant, including Lloyd’s Australia Ltd’s cover-

holders and claims administrators, is now required to engage in an Annual Compliance

Statement program over a three year cycle comprised of:

one desk top audit conducted by FOS Code once every three years (this process

was previously undertaken annually); and

self-certification of compliance procedures, processes and systems in each of the

other two years, which must be signed by the Chief Executive Officer or Chair of the

Board.

In 2012-2013, FOS Code scheduled and conducted 51 desktop audits and 100 self-

certification assessments.

This Code compliance monitoring program fosters:

self-assessment and analysis by the Code Participant in relation to the Code and

ensures elevation of outcomes of this analysis to the Chief Executive Officer or

Chair of the Board;

independent verification of Code compliance and monitoring processes, procedures

and systems by FOS Code whilst ensuring an efficient use of resources;

insight by the Committee into Code Participants’ compliance with the Code;

The program assists FOS Code and the Committee in:

forming a view about the overall level of industry compliance;

assessing the adequacy of Code compliance frameworks, and

identifying significant breaches and systemic failures.


FOS Code or the Committee may require a Code Participant to undergo a further desktop

audit or additional Code monitoring activity if necessary:

due to the nature and/or extent of breaches identified by FOS Code during the self

certification process;

if the Committee is not satisfied with the corrective action taken by the Code

Participant; and

in circumstances where FOS Code is unable to reach agreement with the Code

Participant regarding corrective action.

The Committee has noted the advice from FOS Code that the Annual Compliance

Statement program has generally been implemented successfully. The Committee

encourages all Code Participants to use the three year calendar provided by FOS Code to

prepare for a desk top audit or self certification questionnaire well in advance of the due

date provided.

5.4 Key Performance Indicators of the Committee

In 2009, the Committee adopted a set of key performance indicators (KPIs) by which to

assess its own performance. These indicators were developed in consultation with the

Consumers Federation of Australia (CFA), the ICA, and FOS.

These indicators have been updated from time to time as required.

The KPI Report for 2012-2013 is attached at Schedule 4. The Committee is pleased to

report that it has met all relevant indicators in the reporting period.

6. Complaints about the Committee

Clause 6.5 of the Deed sets out a scheme by which the Committee must handle any

complaints alleging that we have not acted in accordance with our Charter or the Code.

The Committee has not received any such complaint in this reporting year.

7. Code Participants

Schedule 5 to this Report provides a list of the relevant Code Participants as at 30 June

2013.

8. Conclusion

The work of the Committee is very much dependent on the efforts of the FOS Code team

in particular Rose-Marie Galea, Gina Vasquez and Sherman Bernard. We thank them for

their support of the Committee in providing secretariat and operational services.

The support of FOS is also much appreciated by the Committee. We thank Shane

Tregillis, the FOS Chief Ombudsman for this support and note the benefit of this

contribution to our operations.


We are also very grateful for the support and advice provided to us by Dr June Smith,

General Manager, FOS Code Compliance and Monitoring. June’s professional

commitment to the work of the committee, her reliability and her patience are all greatly

appreciated. In this year we are particularly grateful for the extraordinary work and wise

counsel provided by her in respect of the Code Review.

By the Committee:

Michael Gill John Anning Julie Maron

Date: 27 September 2013


Schedule 1 - Members of the Committee 2012-2013

Michael Gill – Chair

Michael was appointed Chair of the Code Compliance Committee under the General

Insurance Code of Practice in July 2006. He was also involved with the former General

Insurance Code of Practice in the capacity as Chair of the Code Compliance Committee

between 1995 and July 2006.

Michael is one of the best known lawyers working alongside the insurance industry and

has earned wide respect for his close relationships with the various industry associations

and companies. He is a Consultant at DLA Piper Australia in Sydney, and has practiced

as a lawyer for more than 40 years in all aspects of insurance and reinsurance work. A

former President of the Law Society of NSW and Law Council of Australia, he is President

of the International Insurance Law Association. He has acted as the inaugural Chairman

of the Motor Accidents Authority (NSW). He was the founding President of the Australian

Insurance Law Association.

John Anning - Industry Representative

John was appointed General Manager of the Policy Regulation Directorate, Insurance

Council of Australia, in April 2007 and brings considerable experience in the areas of

public policy and regulatory matters as well as in the areas of corporate and government

relations.

Prior to his appointment at the ICA, John worked for the Financial Planning Association as

General Manager - Policy and Government Relations and was responsible for providing

strategic and technical advice on regulation, public policy matters and lobbying activities.

John has also held senior management positions in Government and Corporate Affairs

roles with the Commonwealth Bank of Australia and Telstra. John was also with the

Department of Foreign Affairs and Trade where his roles included First Secretary,

Australian Embassy, Paris.

John has a Master of Public Affairs, Bachelor of Legal Studies and a Bachelor of Arts.

Julie Maron - Consumer Representative

Julie has been a practicing solicitor for 12 years, having worked in private practice and

government legal departments in Canberra, before moving to her current role as a senior

consumer lawyer for Legal Aid NSW, based in Wagga Wagga in regional NSW.

Julie has assisted hundreds of consumers with insurance matters after natural disasters,

including the 2010/11 QLD floods, the 2010 and 2012 Riverina floods and the 2013

Warrumbungles bushfire. Julie was the consumer adviser to the recent Independent

Review of the General Insurance Code of Practice.


Peter Gartlan - Alternate Consumer Representative

Peter has been a financial counsellor for a number of years and is based in the Yarra

Ranges in Victoria. Peter is executive officer at the Financial and Consumer Rights

Council, the peak body for financial counselors in Victoria. He is currently a board director

at the Consumer Action Law Centre and the Energy and Water Ombudsman Victoria. He

is a former consumer representative of the General Insurance Code Compliance

Committee and Insurance Brokers Disputes Ltd. He holds qualifications in financial

counseling, training and assessment.

Fiona Cameron - Alternate Industry Representative

Fiona has been the ICA’s nominated alternate industry representative since 25 June 2010

and has broad general and insurance industry knowledge including specific knowledge of

the operation of the Code, its recent 2012 amendments having worked with the 2012

Code Review Working Group.

Peter Rashleigh - Alternate Chair

Peter has practised as an insurance lawyer and commercial litigator since 1971 and was

admitted to partnership in the DLA Piper Australia insurance practice in 1977.

For over 30 years he has enjoyed a diverse insurance and litigation practice that has

covered all aspects of liability and insurance law. This has included professional

negligence insurance schemes and advising local and international professional

indemnity insurers on multi-million dollar cases. Peter is recognised as a leader in general

insurance and professional liability law in Australia.

Peter is a barrister and solicitor of the Supreme Court of Victoria and New South Wales.


Schedule 2 - Aggregated Breach Data for Year Ending 30 June 2013


FOS Code Compliance and Monitoring Team

August 2013

General Insurance Code of Practice

Report to the Code Compliance Committee

Aggregated Breach Data

1 July 2012 – 30 June 2013


Introduction

This Report has been prepared by FOS Code Compliance and Monitoring (FOS Code) for the

Code Compliance Committee (the Committee) to summarise information drawn from quarterly

reports provided to the Committee, during the year ending 30 June 2013 (this year), as follows:

Aggregated breach data, in accordance with section 7.9.

Reports of significant breaches of the Code, in accordance with section 7.12(a).

Reports on outcomes of Code compliance reviews, in accordance with section 7.12(b).

This aggregated breach data comprises finalised breaches only i.e. breaches which may have

been identified by, or reported to, us either prior to or during this year, and which we recorded as

finalised (closed) during this year, unless stated otherwise. As a result, throughout this report we

have used the term “recorded breaches” to mean breaches that were finalised during the reporting

year. Where available this report also includes comparative data from the previous year ending 30

June 2012.

All references to the Code in this report are to the current edition which became effective on 1 July

2012 unless stated otherwise.


1. Aggregated Breach Data - Year ending 30 June 2013

1.1 Overall Breach Numbers

We recorded 78 breaches during this year as seen in Chart 1A. During the previous 12 month

period ending 30 June 2012 (the previous year), we recorded 67 breaches. The Code breaches

during this year consisted of:

61 (78%) breaches of the claims handling standards.

13 (17%) breaches of the complaints handling standards.

4 (5%) breaches of the standards applicable to buying insurance.

Chart 1A: Breaches by Code Category – 2011-12 & 2012-13

1.2 Types and Frequency of Breaches

Charts 1B and 1C below describe the types and frequency of breaches recorded during 2012-13.

Data from 2011-12 has also been included for comparative purposes. Chart 1B depicts breaches

recorded against the claims handling standards of section 3, while Chart 1C shows breaches of

section 2, buying insurance and section 6, complaints handling procedures.

1.2.1 Section 3, Claims handling standards

We recorded 61 breaches of the claims handling standards (section 3) this year compared with 37

in the previous year, as seen in Chart 1B below.

This year the most frequently recorded breaches of section 3 arose in relation to sections

3.5.5(b)(i) and (ii), with 24 breaches in total. These standards became operational on 1 July 2012

following amendments to the Code by the Insurance Council of Australia (ICA). The standards of

section 3.5.5(b) provide as follows:

3.5 The following standards apply to all claims.

...

1

37

2

27

67

4

61

13

78

0

10

20

30

40

50

60

70

80

90

Section 2 Buying Insurance

Section 3 Insurance Claims

Section 4 Responding to Catastrophes &

Disasters

Section 6 Complaints Handling Procedures

Total

2011-12

2012-13


5. If we deny your claim, we will:

...

b) inform you of your right to:

i. ask for copies of information about you that we rely upon in assessing your claim and

ii. request a review under 3.5.3 of any decision we take to decline to release such

information;

...

One Code Participant identified and reported 14 of these 24 breaches to us. These particular

breaches occurred due to the Code Participant’s failure to ensure that its template for claim denial

letters had been updated to reflect the new section 3.5.5(b) standards. We identified the remaining

10 breaches through our review of another Code Participant’s compliance with the Code. These 10

breaches occurred because a number of claims staff had used an old template for claim denial

letters, rather than the new template that had been introduced by the Code Participant.

This year eight of the section 3 breaches were significant Code breaches. We did not record any

significant breaches during 2011-12. See also part 1.2.3 Significant Breaches below.

1.2.2 Sections 2, Buying Insurance and 6, Complaints Handling Procedures

Chart 1C below shows that we recorded 17 breaches overall in relation to sections 2 and 6 during

the reporting period, consisting of four breaches of section 2 and 13 breaches of section 6.

The fall in overall breach numbers from the 30 recorded in 2011-2012 is due to a 52% drop in

recorded breaches of the complaints handling standards (section 6), with 13 breaches compared

with 27 breaches in the previous year.

Section 6.1.1 attracted eight breaches, one more than in 2011-12. Section 6.1.1 requires Code

Participants to conduct complaints handling in a fair, transparent and timely manner.

We recorded only two breaches of section 6.9(c) in 2012-13 compared with 11 breaches

previously. Section 6.9(c) requires a Code Participant to notify a customer of the timeframe for

lodging a dispute with and external dispute resolution (EDR) service.

In relation to section 2, we recorded four breaches compared with only one breach in 2011-12. All

four breaches of section 2 were significant breaches of the Code. We did not record any significant

breaches of section 2 during the previous year. See also part 1.2.3 Significant Breaches below.


Chart 1B Number and Types of Breaches - 2011-12 & 2012-13: Section 3, Claims Handling Standards

Breaches 2011-12 2012-13

Section 3 Insurance Claims 37 61

1

3

5

1

3

3

1

7

4

3

5

1

1

1

2

5

3

1

3

1

12

12

1

4

4

2

2

2

4

1

0 2 4 6 8 10 12 14

3.1 - Timeframe for making decision on simple claim and notifying customer of decision.

3.2.1 (a) - Notify customer of required detailed information.

3.2.1 (c) - Provide initial time estimate claim.

3.2.3 - Customer informed claim progress.

3.2.4 - Respond customer's requests.

3.2.5 - Make claim decision.

3.4.2 - Take into account relevant claim information.

3.4.5 (a) - Provide written reasons for claim denial.

3.4.5 (b) - Provide information about complaints handling procedures.

3.4.5(c) - Provide on request copies of reports from Service Providers.

3.5.1 - Claims handling fair, transparent and timely.

3.5.5 (a) - Written reasons deny claim.

3.5.5 (b) (i) - Right to information used to assess claim.

3.5.5 (b) (ii) - Review decision to decline release of information.

3.5.5 (c) - Information about complaints handling

3.7.1 - Claims services honest, efficient, fair & transparent.

3.7.6 - Adequate training.

3.11 - Comply with ACCC & ASIC Debt Collection Guidelines.

3.12 (a) - Extend repayment period & reduce amount of each payment accordingly

3.12 (b) - Postpone payments.

3.12 (c) - Extend repayment period & postpone payments for agreed period.

3.13 (a) - Provide information about complaints handling procedures.

3.13 (b) - Provide information about AFCCRA.

Cla

ims

Han

dlin

g

2011-12

2012-13


Chart 1C Number and Types of Breaches - 2011-12 & 2012-13: Buying Insurance and Complaints Handling Procedures

Breaches 2011-12 2012-13

Section 2 Buying Insurance 1 4

Section 4 Responding to Catastrophes & Disasters 2 -

Section 6 Complaints Handling Procedures 27 13

Total 30 17

1

1

1

7

1

1

2

1

4

11

3

1

8

1

1

1

2

0 2 4 6 8 10 12 14 16

2.1.4 - Sales process fair, honest & transparent.

2.4.1 - Sales services honest, efficient, fair & transparent.

2.4.5 - Adequate training of Employees & Authorised Representatives.

4.5(a) - Inform about entitlement.

4.5(b) - Inform about complaints handling procedures.

6.1.1 - Complaints handling fair, transparent & timely.

6.1.2 - Information about complaints handling procedures.

6.2 - Timeframe for response to complaints.

6.6 (a) - Treat as dispute if customer wants response to complaint reviewed.

6.6 (c) - Timeframe for response to dispute.

6.9 (a) - Give reasons for decision.

6.9 (b) - Give information about how to access available EDR schemes.

6.9 (c) - Notify of timeframe to register dispute with EDR scheme.

Bu

yin

g In

sura

nce

C

atas

tro

ph

es

Co

mp

lain

ts H

and

ling

2011-12

2012-13


Page 33 of 70

1.2.3 Significant Breaches

In 2012-13 we recorded 12 significant breaches, involving seven Code Participants, as outlined in

Table 1D on this page. Eight of the twelve breaches involved the claims handling standards

(section 3) while the remaining four breaches arose from the standards applicable to buying

insurance (section 2).

Table 1D - Significant Breaches 2012-13

Section Total

2.1.4 - Sales process fair, honest & transparent. 3

2.4.5 - Adequate training of Employees & Authorised Representatives. 1

3.1 - Timeframe for making decision on simple claim and notifying customer of decision.

1

3.2.1 (a) - Notify customer of required detailed information. 1

3.2.1 (c) - Provide an initial estimate for claim decision. 1

3.2.3 - Customer informed claim progress. 1

3.2.4 - Respond to customer’s routine requests. 1

3.5.1 - Claims handling fair, transparent & timely. 1

3.7.1 - Claims services honest, efficient, fair & transparent. 2

Total 12

The effect of these significant breaches on consumers varied widely in relation to the number of

consumers affected by the breach and the type of detriment sustained. In some instances the

impact was limited to claims handling delays, while in other instances consumers suffered a

financial detriment, as summarised below.

1. Sections 2.1.4 breaches: 167,066 consumers affected. Total refunds of $1,332,795 paid to

162,492 consumers.

2. Section 2.4.5: New PDS documents sent to 4,574 affected consumers.

3. Sections 3.1, 3.2.1(a) and (c), 3.2.3, 3.2.4 and 3.2.5: Delays in determination of claims

and/or failure to update consumers on claim progress affected 19,165 consumers.

4. Sections 3.5.1 and 3.7.1: $211,123 paid to 1,854 affected consumers.

Further information about these breaches and the significant breach reports provided to the

Committee is provided in part 4 Significant Breach Reports below.

1.2.4 Breaches involving a lack of fairness, honesty or transparency

There were five significant breaches during 2012-13 which involved a lack of fairness or a lack of

transparency by five Code Participants as follows:

1. Section 2.1.4, three significant breaches:

All three Code Participants had failed to conduct their sales process in a transparent

manner.

Two of the three incidents led to a number of consumers being overcharged on

renewal of their insurance cover, contrary to the terms of the applicable policies.


Page 34 of 70

The remaining incident resulted in a failure to send Product Disclosure Statements to

some customers who had varied their insurance cover.

Several factors led to each of these significant breaches including:

Inadequate training of authorised representatives.

A lack of monitoring to ensure that a new process was being followed by authorised

representatives.

Conflicting consumer information about various discounts applicable to renewal

premiums.

2. Section 3.7.1, two significant breaches:

Two Code Participants had failed to conduct claims handling in a fair manner.

One of the Code Participants had interpreted a policy term in a manner that resulted in

some consumers not being fully indemnified for their financial losses.

The other Code Participant failed to refund an excess or excesses paid in respect of a

claim, to which the consumer was entitled.

1.3 Code Participants

1.3.1 Outcomes of Code Compliance Reviews

The predominant issue identified through these compliance reviews was non-compliance with the

new standards outlined in section 3.5.5(b) of the Code, resulting in 10 of these 11 breaches.

Section 3.5.5 outlines the nature of the information that must be included when informing a

customer in writing that their claim has been denied.

We completed 37 Code compliance reviews between 1 July 2012 to 30 June 2013 and we were

satisfied that:

35 Code Participants had processes and systems in place which facilitated Code

compliance.

Two Code Participants did not comply with some aspects of the Code, resulting in the

identification of 11 breaches. The Code Participants rectified all the breaches.

1.3.2 Code Participants with Five or more Breaches

Chart 1E below contains aggregated breach and compliance data across the reporting period for

Code Participants which had breaches recorded during this year.

The data shows that we recorded five or more breaches against the following six Code

Participants: 6, 25, 38, 56, 57 and 141.

Code Participant 6:

The Code Participant operates as a claims manager on behalf of other general insurers. The 10

breaches recorded against the Code Participant related to one of the claims handling standards of

the Code, which we identified during our review of its compliance with the Code.

The Code Participant implemented a number of measures to address the breaches including

providing affected customers with the required information.


Page 35 of 70

Code Participant 25:

The Code Participant operates as a general insurer throughout Australia. The eight recorded

breaches arose from our investigation of two separate and unrelated matters involving compliance

with the Code’s third parties recoveries financial hardship standards.

The Code Participant remedied the breaches and, based on the information provided by the Code

Participant, we were satisfied these were isolated matters and not indicative of a wider compliance

issue.


The Code Participant, which operates as a general insurer throughout Australia, identified and

reported 14 breaches of one of the Code’s claims handling standards.

The Code Participant rectified the breaches by providing affected customers with the required

information and amending an existing template document to ensure compliance with the particular

Code standard.


The Code Participant is a general insurer operating throughout Australia. We recorded six

breaches which arose from our investigation of three separate and unrelated matters. Each of

these matters involved a different aspect of the Code’s claims handling standards.

The Code Participant remedied the breaches and we were satisfied that the breaches were

isolated and not indicative of a wider compliance issue.


The Code operates nationally as a general insurer. We recorded six breaches against the Code

Participant, including one significant Code breach involving the Code’s sales standards.

The other five breaches were identified through two separate and unrelated investigations. These

breaches involved the Code’s claims handling standards and we were satisfied that they were

isolated and not indicative of a wider compliance issue.

All six breaches, including the significant breach, have been remedied by the Code Participant.


The Code Participant is a general insurer operating throughout Australia. The eight breaches

recorded against the Code Participant this year arose from our investigation of two separate and

unrelated matters, one of which involved the third parties recoveries financial hardship standards

while the other matter involved the complaints handling standards.

We were satisfied that these matters were isolated and not indicative of a wider compliance issue.

All eight breaches were remedied by the Code Participant.


Chart 1E Code Participants – 2011-12 & 2012-13

10

2

1

8

1

14

4

6 6

1

4

1

2

1 1

2

4

2

8

1

3

3

4

1

1

1

9

5

2

5

5

2

3

10

6

3

1

1 1 0

2

4

6

8

10

12

14

16

4 6 7 9 25 30 37 38 47 51 56 57 68 72 74 75 86 97 100 111 117 131 132 135 138 141 145 153

Bre

ach

ese

Participants

2011-12 Total Breaches = 67

2012-13 Total Breaches = 78


2. Breaches by Source - Year ending 30 June 2013

Chart 2F on this page illustrates the referral source by number of breaches recorded in this

year, together with data from 2011-12.

In 2011-12 (and previous periods) the predominant referral source of recorded breaches was

FOS. However, in 2012-13 Code Participants dominated as a source, with 22 breaches

identified and reported to FOS.

Legal Centres were the source of a further 21 breaches, up from nine in the previous year.

This year FOS EDR was the source of 16 breaches, down from 35 in 2011-12.

Chart 2F: Breach Sources in 2011-12 and 2012-13

5

18

35

9

67

22

13

5

16

21

1

78

0

10

20

30

40

50

60

70

80

90

Code Participant Code Review Customer FOS EDR Legal Centre Financial Counsellor

Grand Total

2011-12

2012-13


3. Breach Causes & Corrective Actions - Year ending 30 June 2013

3.1 Overall Breach Causes

Table 3G below shows that overall the most common cause of breaches recorded in 2012-13

was a failure to adhere to established processes.

Process not followed:

Of the 78 breaches we recorded this year, 41 breaches, or 53%, were due to a failure to follow a

process. While human error can occur and may not of itself constitute a breach of the Code, this

outcome emphasises the importance of a number of tools that Code Participants’ may use to

ensure compliance with the Code’s service standards, including the following:

Providing ongoing training to employees and Authorised Representatives about the

processes that Code Participants expect them to follow and the role they play in achieving

compliance with service standards.

Monitoring a new process to ensure that it is effective, has been understood by those who

will be using it, and that the process is being applied.

Building key performance indicators into service level agreements with Service Providers

who act on behalf of Code Participants during claims handling.

Monitoring the performance of employees, Authorised Representatives and Service

Providers.

Documents not checked for compliance:

In 2012-2013, we identified 17 breaches that were caused by a failure to ensure that documents

continued to comply with the Code’s standards. This highlights the importance of:

Conducting a gap analysis of relevant documents to identify areas requiring amendment

to ensure continuing compliance.

Removing from circulation, or preventing access to, out-dated documents.

Table 3G Causes of Breaches in 2012-13

Breach Causes

Administrative error 7

Documents not checked for compliance 17

Inadequate process. 1

Inadequate training 2

Insufficient staff resources 4

Miscommunication 3

No process 2

Policy misinterpreted 1

Process not followed 41


Total 78

3.2 Overall Corrective Actions

The types of corrective actions implemented by Code Participants to address non-compliance

with Code obligations this year are outlined in Table 3H below.

Remedial training was the predominant approach and was used to address breaches. It was

used exclusively in response to 25 breaches and used with one or more other corrective actions

for the remaining 13 breaches.

Table 3H Corrective Actions in 2012-13

Corrective Actions in response to Breaches

Corrective information to affected customers 1

Improved monitoring 1

Improved proc/sys 2

Improved proc/sys & corrective info 2

Increased staff resources 4

Increased staff resources & process improvement 4

Process improvement & corrective information to affected customers

10

Refund customers & improved proc/sys 1

Remedial training 25

Remedial training & corrective information to affected customers 5

Remedial training & improved proc/sys 1

Remedial training & increased monitoring 2

Remedial training & indemnify affected customers 1

Remedial training & process improvement 1

Remedial training, process & system improvement 3

Update documents 1

Update documents & corrective information to customers 14

Total 78


3.3 Causes and Corrective actions - Breaches of Section 2 and Section 6

Table 3I (in Appendix 1) outlines the causes and corrective actions used in response to non-

compliance with section 2 standards, buying insurance and section 6, complaints handling

procedures.

The data indicates that five of the eight breaches of section 6.1.1 were due to a process failure.

Section 6.1.1 requires Code Participants to conduct complaints handling in a fair, transparent

and timely manner.

Remedial training was the predominant approach to addressing breaches of sections 2 and 6. It

was used exclusively on nine occasions and in combination with other actions on a further four

occasions.

3.4 Causes and Corrective actions - Breaches of Section 3

The causes and corrective actions adopted by Code Participants to address non-compliance

with the claims handling standards found in section 3 are outlined in Table 3J (in Appendix 2).

Table 3K (in Appendix 3) looks at the causes and corrective actions applicable to breaches of

the third parties recoveries standards of the Code.

The data shows that:

Process failures caused 24 of the 46 breaches of the claims handling standards of the

Code. See Table 3J.

Remedial training was used exclusively or with other actions to address ten breaches. See

Table 3J.

A combination of process improvement and giving consumers the required information

was used to address a further 10 breaches. See Table 3J.

A refund to affected consumers was also implemented as a corrective measure in

response to one of the significant breaches we recorded this year. See Table 3J.

A failure to ensure that documents continued to comply with the Code resulted in 14 of the

24 breaches of section 3.5.5(b) of the Code.

The remaining 10 breaches of section 3.5.5(b) were due to a process failure. See Table

3J.

Nine of the 15 breaches of the third parties recoveries standards were due to process

failures. See Table 3K.

Remedial training was used to address all 15 breaches of the third parties recoveries

standards, either alone or with other remedial actions. See Table 3K.


4. Significant Breach Reports - Year ending 30 June 2013

Code Participants are under an obligation to monitor2 their compliance with the Code and report

significant breaches to FOS within ten business days.3 The Code requires us to report

significant breaches to the Committee including Code Participants’ agreed corrective action.4

The Code defines “significant breach” as a breach that is determined to be significant by

reference to:

(a) Similar previous breaches;

(b) The adequacy of a Code Participant’s arrangements to ensure compliance with the Code;

(c) The extent of any consumer detriment; and

(d) The duration of the breach.

We dealt with 12 significant breach matters and closed seven of these during 2012 – 2013,

consisting of the following:

We identified five matters as significant breaches,

We received seven new significant breach reports from Code Participants, and

We carried two significant breach matters over from 2011 – 2012.

Each of the significant breach matters before the Committee in 2012-13 has been summarised

below.

Significant Breach One (closed): Code Participant 7

We identified that a Code Participant had significantly breached section 3.7.1 which requires

employees and service providers to conduct their services in an honest, efficient fair and

transparent manner. The significant breach occurred when a Service Provider, which managed

some of the Code Participant’s claims, had misinterpreted the policy definition of “rent” as

authorising deduction of third party payments from rental monies owing to policyholders, for

claims for loss of rent.

The Code Participant accepted that the definition of rent was not sufficiently clear and effective

to authorise deductions of third party payments in this way. The Code Participant and Service

Provider implemented a number of actions to address this matter, including reimbursement

repayments or payments totalling $57,789 (inclusive of interest) to 197 affected consumers and

stopping the practice of deducting third party payments.

Significant Breach Two (closed): Code Participant 72

Another Service Provider was unable to comply with the claims handling timeframes outlined in

sections 3.1, 3.2.1(a), 3.2.1(c) and 3.3 of the Code, due to an unexpected increase in the

volume of travel insurance claims and call volumes. The relevant Code standards require

2 See section 7.2(a) of the Code.

3 See section 7.3 of the Code.

4 See section 7.12(a) of the Code.


specific timeframes to be met during claims handling including in relation to decision making.

The Code Participant notified us that a significant breach of the Code had occurred affecting

6,380 claims.

The Code Participant and Service Provider addressed the significant breach by implementing a

range of remedial actions including:

Daily monitoring of claims handling timeframes and auditing a sample of randomly

selected files, to ensure that the Service Provider continued to meet the relevant Code

timeframes.

Negotiating alternative claims assessment timeframes with customers where appropriate

and asking customers to contact the Service Provider in the event of financial hardship.

Recruitment and training of additional staff.

Significant Breach Three (closed): Code Participant 37

We received a report from a Code Participant that it had significantly breached section 3.7.1 as

a result of a claims processing failure. Some customers had not received a refund of their

excess, after a decision was made to change the status of their motor vehicle claim from “at

fault” to “not at fault”.

The Code Participant identified all affected customers and made payments totalling $153,334

including interest to 1,657 customers. It also implemented system changes to improve the

excess refund process and enhanced its internal risk controls.

Significant Breach Four (closed): Code Participant 75

A claims processing failure by a Code Participant resulted in a lack of follow up with 755

customers after they submitted their travel insurance claims. The Code Participant reported a

significant breach of sections 3.2.3 and 3.5.1, which require customers to be kept updated about

claim progress at least every 20 business days and for claims handling to occur in a fair,

transparent and timely manner.

The Code Participant addressed the significant breach by contacting all affected customers to

advise them of the claim status and what was required to complete claims processing. It also

implemented system changes and improved claims monitoring to ensure that claims handling

timeframes were being met.

Significant Breaches Five (closed) and Six: Code Participant 132

In the course of an annual review of a Code Participant’s compliance with the Code, we

established that it had significantly breached section 2.1.4 and 2.4.5 on one occasion and

section 2.1.4 on the second occasion. Section 2.1.4 requires a Code Participant to conduct its

sales process in a fair, honest and transparent manner, while section 2.4.5 requires a Code

Participant to ensure that Authorised Representatives receive adequate training.

Although the Code Participant had notified ASIC of these matters, it had incorrectly concluded

that it had not breached the Code.


The first significant breach occurred when the Code Participant’s Authorised Representatives

failed to forward various Product Disclosure Statements (PDSs) to a number of customers who

had changed their insurance cover. The Code Participant had introduced a new process for

issuing PDSs to customers who had varied their insurance cover, but it had failed to implement

measures to ensure that its authorised representatives were applying the new process. It also

conceded that the training for the new process was inadequate. The Code Participant

subsequently provided the relevant PDSs to 4,574 affected customers, developed an automated

solution and improved its monitoring of authorised representatives.

In relation to the second significant breach, the Code Participant was unaware a new policy

administration system had incorrectly calculated renewal premiums applicable for some

customers who held motor vehicle insurance policies. The Code Participant implemented a

number of measures to address this matter, including payments totalling $644,891.50 to 6,651

affected customers.

Significant Breach Seven (closed): Code Participant 57

During our investigation of an alleged breach of the Code, we identified that a Code Participant

had significantly breached section 2.1.4 of the Code. This was associated with a lack of

transparency in the Code Participant’s sales process which led to a pricing error in renewal

premiums for a number of home insurance products. Although the Code Participant had

reported the matter as a significant breach to ASIC, it had failed to also consider whether the

issue amounted to a Code breach, due to a gap in its breach incident management processes.

We identified that a number of factors had contributed to the significant breach including the

following:

The presence of unclear and inconsistent consumer information about various insurance

premium discounts available to eligible customers on renewal of their policies.

A lack of awareness of this issue until an internal investigation occurred, triggered by the

discovery of the pricing error underlying the relevant discounts.

The application of the relevant discounts in a way that was inconsistent with the disclosed

consumer information about the discounts.

The diligence processes and sign offs for disclosure of the various marketing, policy and

sales documentation which failed to identify these inconsistencies.

The Code Participant implemented a number of remedial actions including repayments totalling

$450,294 (including interest) to on or on behalf of 103,894 affected consumers, reviewing all

disclosure documents to ensure the consistency of information about available discounts and

enhancing its breach incident management processes.

Significant Breach Eight (closed): Code Participant 68

We concluded that a Code Participant had significantly breached section 2.1.4, because of a

failure to meet the requirement of transparency in its sales process. This matter was identified

during our investigation of a breach allegation.


The Code Participant discovered an error in the calculation of renewal premiums applicable to

some home insurance products and reported this as a significant breach to ASIC. However the

Code Participant’s Breach Committee failed to consider whether it had also breached its Code

obligations.

We took into account several factors when determining that this matter was a significant breach

of the Code including the following:

The duration of the breach.

The impact of the breach on consumers.

The failure to identify inconsistencies in consumer-facing material about the relevant

premium discounts through the Code Participant’s diligence and sign off processes.

A failure to appreciate the exactness required for the applicable premium discounts and

the legal consequences of changing the discounts.

The Code Participant rectified the breach through a number of mechanisms, including

addressing the gap in the Breach Committee’s processes and repayments to or on behalf of

51,947 consumers totalling $237,609 including interest.

Significant Breach Nine: Code Participant 97

A Code Participant reported to us that a number of its customers were experiencing claims

handling delays as it was unable to meet the timeframes set out in sections 3.1, 3.2.1(a) and (c)

and 3.2.5 of the Code. The relevant Code standards require specific timeframes to be met

during claims handling, including in relation to making a decision on the claim.

The Code Participant estimated that approximately 2700 travel insurance claims had been

affected by the delays, which arose from:

An unexpected and unusually high volume of claims.

An inability to cover staff absences.

Delays in employing adequately trained new staff in the affected area.

The Code Participant also reported that the relevant claims team had been aware of the claims

handling delays for some time and had attempted to rectify the issue. However, the claims team

failed to internally report the delays via the Code Participant’s breach incident management

system, contrary to the Code Participant’s procedures.

The Code Participant has improved the monitoring of the relevant claims team and cleared the

claims handling delays. We continue to work with the Code Participant to rectify this matter.

Significant Breach Ten: Code Participant 117

A Code Participant identified that it had significantly breached 6.1.2 of the Code which requires

it to make information about its complaints handling procedures available. The breach arose in

the following circumstances.


The Code Participant uses a Service Provider to manage strata insurance claims. The Service

Provider instructed a legal firm to negotiate settlement of a consumer’s strata insurance claim.

When the consumer asked whether the Service Provider’s internal dispute resolution (IDR)

process would be available to him if negotiations failed, the lawyer incorrectly informed the

consumer that IDR would be unavailable.

The lawyer subsequently became concerned that he may have misunderstood the Service

Provider’s IDR processes and raised it with his Supervising Partner. The matter was reported to

the Service Provider and the lawyer subsequently provided the correct information to the

consumer about the availability of IDR. The Service Provider notified the Code Participant of the

failure.

The Code Participant reviewed the files that had been managed by the legal firm and

established that no other breaches of the Code had occurred. It also ensured that the lawyers

who acted for the Service Provider understood the operation of its IDR process. The Code

Participant is continuing to work toward a resolution of this matter.

Significant Breach Eleven: Code Participant 167

The Code Participant notified us that it had significantly breached sections 2.4.5, 2.4.6 and 2.4.8

in relation to one of its Authorised Representatives (ARs). These Code standards set out the

training requirements, including Code training, for Code Participants’ employees and ARs and

performance monitoring.

Following identification of this issue the Code Participant reviewed its records to ensure that

there were no compliance breaches or complaints about the AR.

The Code Participant confirmed that there had been a delay in identifying this matter as a

significant breach, due to changes in personnel and limited access to a newly launched risk

management tool in the area of the business that managed the AR. The Code Participant is

working with us to rectify this matter.

Significant Breach Twelve: Code Participant 128

A Code Participant notified FOS that it had significantly breached sections 3.1 and 3.2.5 of the

Code, due to delays in actioning incoming customer correspondence. The delays affected the

Code Participant’s ability to make a decision to accept or deny some customers’ home

insurance claims, within the ten business day timeframe required by these standards of the

Code.

Based on the outcome of quality assurance sampling, the Code Participant estimated that the

significant breach affected 9,330 claims. The Code Participant has informed us that it is

assessing the nature and extent of any consumer detriment and has identified that there may be

a financial impact to its customers. We continue to work with the Code Participant toward a

resolution of this matter.


Appendix 1: Table 3I - Sections 2 & 6: Breach causes and corrective actions 2012-13

Causes 2012-13 Corrective Actions 2012-13

Tota

l Bre

ach

es

Section 2, Buying Insurance

Section 6, Complaints Handling Standards

Ad

min

istr

ativ

e e

rro

r

Do

cum

en

ts n

ot

che

cke

d f

or

com

plia

nce

Inad

eq

uat

e t

rain

ing

Mis

com

mu

nic

atio

n

Pro

cess

no

t fo

llow

ed

Co

rre

ctiv

e in

form

atio

n t

o a

ffe

cte

d c

ust

om

ers

Imp

rove

d p

roc/

sys

Re

me

dia

l tra

inin

g

Re

me

dia

l tra

inin

g &

incr

eas

ed

mo

nit

ori

ng

Re

me

dia

l tra

inin

g &

pro

cess

imp

rove

me

nt

Re

me

dia

l tra

inin

g, p

roce

ss &

sys

tem

imp

rove

me

nt

Up

dat

e d

ocu

me

nts

3 2.1.4 - Sales process fair, honest & transparent. 2 1 1 2

1 2.4.5 - Adequate training of Employees & Authorised Representatives. 1 1

8 6.1.1 - Complaints handling fair, transparent & timely. 2 1 5 5 1 1 1

1 6.2 - Timeframe for response to complaints. 1 1

1 6.9 (a) - Give reasons for decision. 1 1

1 6.9 (b) - Give information about how to access available EDR schemes. 1 1

2 6.9 (c) - Notify of timeframe to register dispute with EDR scheme. 1 1 1 1

17 Total Causes/Corrective Actions 2 3 2 2 8 1 2 9 1 1 2 1


Appendix 2: Table 3J - Section 3: Breach causes and corrective actions 2012-13


Tota

l Bre

ach

es

Section 3, Claims Handling Standards

Do

cum

en

ts n

ot

che

cke

d f

or

com

plia

nce

Inad

eq

uat

e p

roce

ss.

Insu

ffic

ien

t st

aff

reso

urc

es

No

pro

cess

Po

licy

mis

inte

rpre

ted

Pro

cess

no

t fo

llow

ed

Imp

rove

d m

on

ito

rin

g

Imp

rove

d p

roc/

sys

& c

orr

ect

ive

info

Incr

eas

ed

sta

ff r

eso

urc

es

Incr

eas

ed

sta

ff r

eso

urc

es

& p

roce

ss im

pro

vem

en

t

Pro

cess

imp

rove

me

nt

& c

orr

ect

ive

info

rmat

ion

to

af

fect

ed

cu

sto

me

rs

Re

fun

d c

ust

om

ers

& im

pro

ved

pro

c/sy

s

Re

me

dia

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inin

g

Re

me

dia

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inin

g &

ind

em

nif

y af

fect

ed

cust

om

ers

Up

dat

e d

ocu

me

nts

& c

orr

ect

ive

info

rmat

ion

to

cust

om

ers

1 3.1 - Timeframe for making decision on simple claim and notifying customer of decision. 1 1

1 3.2.1 (a) - Notify customer of required detailed information. 1 1

2 3.2.1 (c) - Provide initial time estimate claim. 1 1 1 1

5 3.2.3 - Customer informed claim progress. 1 4 1 1 3

3 3.2.4 - Respond customer's requests. 1 2 1 1 1

1 3.2.5 - Make claim decision. 1 1

3 3.5.1 - Claims handling fair, transparent and timely. 1 2 1 1 1

1 3.5.5 (a) - Written reasons deny claim. 1 1

12 3.5.5 (b) (i) - Right to information used to assess claim. 7 5 5 7

12 3.5.5 (b) (ii) - Review decision to decline release of information. 7 5 5 7

1 3.5.5 (c) - Information about complaints handling. 1 1

4 3.7.1 - Claims services honest, efficient, fair & transparent. 1 1 2 1 1 1 1

46 Total Causes/Corrective Actions 14 1 4 2 1 24 1 2 4 4 10 1 9 1 14


Appendix 3: Table 3K - Section 3.11 – 3.13: Breach causes and corrective actions 2012- 13


Tota

l Bre

ach

es

Sections 3.11 – 3.13, Financial Hardship

(Third Parties Recoveries) Standards

Ad

min

istr

ativ

e e

rro

r

Mis

com

mu

nic

atio

n

Pro

cess

no

t fo

llow

ed

Re

me

dia

l tra

inin

g

Re

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dia

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inin

g &

co

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e in

form

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n t

o a

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cte

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om

ers

Re

me

dia

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inin

g &

imp

rove

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roc/

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Re

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dia

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incr

eas

ed

mo

nit

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ng

Re

me

dia

l tra

inin

g, p

roce

ss &

sys

tem

imp

rove

me

nt

4 3.11 - Comply with ACCC & ASIC Debt Collection Guidelines. 4 3 1

2 3.12(a) - Extend repayment period & reduce amount of each payment accordingly. 1 1 1 1

2 3.12 (b) - Postpone payments. 1 1 1 1

2 3.12 (c) - Extend repayment period & postpone payments for agreed period. 1 1 1 1

4 3.13 (a) - Provide information about complaints handling procedures. 1 1 2 1 1 1 1

1 3.13 (b) - Provide information about AFCCRA. 1 1

15 Total Causes/Corrective Actions 5 1 9 7 5 1 1 1


Schedule 3 – GICCC Submission to the Independent Review of the

General Insurance Code of Practice

SUBMISSION OF THE CODE COMPLIANCE COMMITTEE TO THE 2012 INDEPENDENT REVIEW OF THE GENERAL INSURANCE CODE OF PRACTICE

About the Committee

The Code Compliance Committee (the Committee) is an independent Committee

established under the Code to:

monitor compliance by Code Participants with the Code’s obligations, through reports

received from the Financial Ombudsman Service (FOS), and

make determinations and impose sanctions where FOS has reported a failure by Code

Participants to correct a Code breach.

About this submission

The Committee sees the independent review of the Code as an important opportunity to

consider, reflect and discuss the Code’s operation over previous years. It is pleased that the

Terms of Reference for the review are wide-ranging.

Accordingly, the Committee has sought in this submission to share its broad experience in

Code monitoring and in the operations of the Code, as they apply to both the Review’s

Terms of Reference and the matters identified in the Issues Paper. In particular, the

Committee makes reference in its submission to the following matters:

(a) Code publicity, awareness and engagement;

(b) Code content, presentation and style;

(c) Code coverage;

(d) Principles, objectives and legal status of the Code;

(e) Training and education;

(f) Code monitoring and investigation;

(g) Code enforcement and sanctions; and

(h) Code Governance and the Committee’s functions, powers and jurisdiction.

In limiting its submission to these issues, the Committee does not suggest that the other

issues are unimportant or of less importance; rather, the Committee has decided to address

those issues where its experience may be of best value to the Independent Review.

One of the key themes identified by the Committee in its work is the importance of

transparency at all levels of the Code’s operations, to the achievement of the Code’s


objectives. This theme is a feature of the Committee’s submission and one of the key

principles on which its content is based.

In drafting this submission, the Committee was also cognisant of ASIC Regulatory Guide 1831.

It is the view of the Committee that the Guide provides a sound framework against which to

benchmark the content of any Code of Practice in the financial services sector, and we support

your consideration of the Guide in the review of the Code.

The Committee also makes the general point that Codes of Practice generally benefit from

an extensive Definition Section or Glossary of Terms. This provides a set of consistent

definitions for use by all stakeholders, when interpreting the Code and its provisions.

1 Australian Securities and Investment Commission, 2005, ASIC Regulatory Guide 183: Approval of Financial

Services Sector Codes of Conduct, March, ASIC, Sydney.


Issue 1 – Code Publicity, Awareness and Engagement

Is the Code adequately promoted to the general insurance industry, to service providers to

the insurance industry, and to customers?

The Committee believes that there is no more important issue. Appropriate and thorough

promotion of the Code and its obligations is a necessary pre-requisite to achieving the

Code’s objectives, including achieving better, more informed relations between insurers and

their customers and improving consumer confidence in the general insurance industry.

In particular, raising awareness of the Code’s benefits is critical to consumer engagement

with the Code. Without it, customers will be unaware of their rights. The ongoing low levels

of referrals of alleged Code breaches from customers and their advocates may indicate a

need for the Code to be more actively promoted with that stakeholder group. The Code also

offers consumers many benefits that may not be readily appreciated.

The Committee cites the positive feedback received from consumer advocates who

participated in the FOS survey on the operation of the Code’s claims handling standards

during the 2010-2011 Queensland Flood Crisis, as an example of how this type of activity

adds value. The constructive exchange of information and dialogue between the FOS Code

team and other stakeholders about Code compliance issues can also greatly assist in raising

awareness of the role and activities of both FOS and the Committee in monitoring

compliance with the Code’s obligations.

The Committee’s view therefore is that the Code should outline clear responsibilities for the

promotion of the Code, its obligations and accountabilities to all stakeholders

The Committee would support an expansion of its functions to include a promotional role,

which it would use to share its experience of good industry practice and Code compliance

with industry, and to assist in raising awareness of Code obligations and customer rights

with customers and consumer advocacy groups. This seems consistent with views

expressed in ASIC Regulatory Guide 183.75.

The Committee also supports the establishment of other strategies to ensure effective

promotion of the Code. It suggests these might include the convening of an appropriately

resourced Code Promotion and Education Group, with industry and consumer

representation.


Issue 2 – Code Content, Presentation and Style

(a) Should the Code consist of principles or rules, or both principles and rules? (b) Should the Code be in plain English?

The Committee’s experience is that Codes of Practice seem to be more effective in

circumstances where they contain both principles and rules. The principles set out in plain

language the outcomes that the rules are meant to deliver to the consumer.

It is the Committee’s experience for example, that Code Participants that follow the Code’s

framework of good industry practice and interpret its rules by reference to the Code’s

objectives and principles, seem better placed to engage effectively with customers. This in

turn has a significant positive impact on the service experience of customers. In our view

this assists with the achievement of the Code’s objectives, to the benefit of the Industry as a

whole.

The Committee believes that Code structure and content may also contribute to consumer

understanding of the Code’s obligations and responsibilities. The Committee therefore

supports the proposal that the Code be in plain English and accessible to its consumer

audience.

The Committee also supports the proposal to develop general guidance for industry and

consumers about the interpretation and application of the Code’s obligations in practice. This

may assist in ensuring a consistent understanding across stakeholders to the revised Code’s

operation and its application.

Guidelines outlining the application and interpretation of Code obligations would also provide

excellent and timely educational material for the industry and be consistent with the objective

to ensure transparency in the operation of the Code.

The Committee seeks to share its experience of code compliance through this guidance and

would also seek to recommend changes to the ICA’s Code Guidelines from time to time as

appropriate, based on its code monitoring experience. The Committee’s view is that the

Guidelines should be seen as a living document, with updates to be distributed as required

to Code Participants.


Issue 3 – Code Coverage

(a) Should the Code apply to general insurers, general insurance industry participants,

agents and service providers that carry on business in Australia?

(b) Should the Code apply to third party beneficiaries of insurance contracts to whom the

Insurance Contracts Act applies?

(c) Should the Code continue to apply to general insurance products as it does now or

include wholesale products?

It is the Committee’s view that the Code should, as far as possible, ensure a consistent

buying experience for all customers. The Committee therefore supports the benefit of broad

commitment to the Code’s obligations across the general insurance sector. The Committee

believes this approach assists in enhancing relationships across the industry and improving

consumer confidence in the services delivered by industry.

The Committee is also of the view that there should be no distinction drawn between an

Insured (in the sense of the contracting party) and policy beneficiaries (other Insureds)

generally. All should have the benefit of the Code’s provisions and have the right to raise

allegations that the Code’s obligations in relation to them have been breached by a Code

Participant.

The Committee notes that section 2.5 of the current Code - in relation to the standards

surrounding the selling and distribution of general insurance products - is limited to the

conduct of employees of the Code Participant or its authorised representatives. The Code

does not currently extend to the activities of general insurance distributors which the

Committee’s experience suggests are increasingly being utilised by Code Participants to sell

their products. The Corporations Action 2001 (Cth) (the Act) deems that general insurance

distributors are not authorised representatives. Excluding general insurance distributors from

the scope of the Code appears unintended. In this regard, the Code may not have kept pace

with the various distribution models being used by Code Participants to sell general

insurance products. Accordingly, the Committee recommends that you give consideration to

extending the obligations of Code Participants, to the conduct of their distributors.

The Committee recognises that one of the key principles of this Code is that Code

participants must comply with the law. The Committee recognises that there is a balance

required between Code principles and legal obligations and that whilst a Code does not

have to replicate the law, it can enhance legal obligations or articulate how a sector will

apply legal obligations in practice.

Another issue which this raises is whether the Code should, in some way, “spell out” relevant

obligations created by law. This may make it a more useful document for all stakeholders.

The length and complexity of the Code and the usual risk of “summarising” or “interpreting”

statutory provisions is acknowledged.


Issue 4 – Principles, Objectives and Legal Status

(a) Are the Code principles and objectives an adequate basis for the Code standards in the light of the criticisms of this aspect of the Code?

(b) The extent to which the Code does or should create enforceable legal rights for customers?

(c) Whether the selected statistics or the FOS QF survey indicate that changes to the principles, objectives or legal status of the Code are necessary and appropriate.

The Committee refers to and repeats its submissions made under Issue 2. It is the

Committee’s view that the Code’s standards must be interpreted so as to achieve the Code’s

objectives to improve consumer confidence and enhance relationships between insurers,

consumers and intermediaries. A legalistic approach to the interpretation of Code standards

in isolation from its objectives can:

result in inconsistent industry practice

overlook good industry conduct, and

overlook how consumers should be treated.

In our experience however, code standards can provide a framework for consistent decision

making and conduct across an organisation and the industry, thus leading to a consistent

experience for customers.

Issue 5 – Training and Education

Whether the Code standards on:

(a) training and education for selling insurance (section 24) remain necessary, and if so, whether they are adequate;

(b) training and education for claims handling (section 3.7) are adequate; (c) financial hardship (3.8 – 3.13) should include training and education standards; (d) information and education (section 5) produce sufficient understanding of the Code

and code standards and insurance in the community to attain better outcomes for insurers and customers.

The Committee recognises that the training and education of Code Participant staff and

service providers in the Code’s obligations is important to the achievement of the Code’s

objectives. The Committee is also aware of the enormous effort, resource and cost which

the industry has generally committed to training, since the inception of the first Code.

The Committee supports the view that for industry training to be effective however, it should

result in a general lift in knowledge and professionalism. Further, refresher training for both

employees of insurers and their service providers is very important to ensure they can

competently apply the Code’s standards in practice.


The Committee encourages consideration of the following:

An ongoing benchmarking and trends survey to track and measure relevant

educational outcomes of Code training.

Identifying what seems to work and what does not, in education and training.

Establishing a monitoring mechanism to ensure training and education does not fall

short of industry benchmarks and objectives.

Regularly publishing the findings of this work so that the industry and its customers

can benefit from the learning.

During the course of monitoring compliance with the current Code, the Committee has noted

instances of non-compliance with the Code’s obligations concerning dealing with customers

and uninsured third parties who may be in financial hardship. The Committee has previously

recommended that Code Participants recognise the importance of the content, language and

delivery of financial hardship training to insurance staff in relation to third party debt and

motor vehicle claims.

Issue 9 – Claims

Whether:

(a) the claims handling standards should be based more expressly around the stage

of a typical claim: lodgement; supply of information by claimant; investigation; assessment; and repair, replacement, payment;

(b) the industry’s practices and Code standards could improve customers’ awareness of their rights under their insurance policies;

(c) the recommendations on time limits and communications should be implemented; (d) the Code’s standards on skills, experience, independence and training of service

suppliers should be enhanced; (e) the recommendations on reasons and evidence on claim denials should be

implemented; (f) the recommendations on assessment process and outcomes should be

implemented; and (g) there should be a time limit on the finalisation of claims once accepted.

The Committee notes that parts (e) and (f) above in particular were the subject of

recommendations made by FOS in its Queensland Floods Survey Report, which the

Committee supports.

In its 2011-2012 Annual Report, the Committee recommended that Code Participants should

review how they monitor the compliance of their service providers with the Code’s claims

handling standards. For example, at page 14-15 of its report, the Committee recommended,

amongst other things that:

The service provider needs to understand the specific Code claims handling standards

that apply to it when handling claims on behalf of the Code Participant.


1. The Code is incredibly well serviced by FOS in its code monitoring role

2. The FOS monitoring process actually influenced a great deal of positive action from

insurers, which ASIC cannot bring to bear because of its limited resources.

The service provider and the Code Participant should have appropriate systems and

processes in place to monitor its compliance with the Code.

Protocols should be established to ensure that the service provider reports a gap in

Code compliance or a potential or actual Code breach to the Code Participant in a

timely manner.

The service provider must be made clearly aware of the consequences that flow from

non-compliance with the Code.

Whilst some aspects of the service provider’s relationship with the Code Participant may be

best addressed through a service level agreement between the parties, it is the Committee’s

view that the Code provisions in this regard could also be enhanced.

Issue 12 – Code Monitoring and Investigation

Whether the Code monitoring and investigations standards and to the extent possible, the

FOS Terms of Reference should:

(a) be promoted better by Code Participants, the CCC and FOS;

(b) be amended to provide that the CCC should be able to give guidance or direction to

FOS about its arrangements and processes for Code monitoring and investigation;

(c) be amended to provide that the CCC not FOS should report to ASIC on a serious

misconduct and systemic breaches;

(d) be amended to provide that the CCC carry out all investigations into allegations of

Code breaches or non-compliance;

(e) be amended to provide that FOS or CCC reports should name a Code Participant who

is under investigation for Code breaches or non-compliance;

(f) best structure and coordinate the roles of FOS, the CCC and ASIC.

Amongst other functions, section 7.14 of the Code requires the Committee to:

Monitor Code compliance through reports received from FOS.

Make determinations and impose sanctions where FOS has reported a failure by a

Code Participant to correct a Code breach.

The Committee recognises the importance of transparency at all levels of the Code’s

operations, to the achievement of the Code’s objectives.

To this end, the Committee requests that consideration be given to amending both the Code

and the Committee’s Charter, to allow FOS to disclose to the Committee the identity of any

Code Participant which is the subject of a significant breach report. The Committee

accepts that there should be a corresponding obligation on its members to keep this

information confidential, unless exercising the Committee’s existing power to name a Code

Participant under section 7.22 of the Code.


1. It is important that all stakeholders have confidence that the code’s obligations will

be enforced against code members and that there are consequences for breaches of the Code. The range of sanctions available to a Code Monitor in its enforcement activity seems to be a key element in building this confidence, as is the monitoring framework that is adopted.

The Committee acknowledges the decision of the ICA in February 2012 to publically release

the Committee’s Annual Reports relating to Code Participant compliance with the Code and

to make them available on the ICA website. The Committee however seeks an amendment

to its Charter to formally recognise its ability to publish reports on its Code compliance

activities.

In responding to Issue 12, the Committee recognises that there is a major distinction to be

drawn between FOS’s role as an External Dispute Resolution Scheme (EDR Scheme), and

FOS’s role as Monitor of the Code. As a result, the Terms of Reference of FOS (as an

approved EDR Scheme), are not relevant to considerations about the governance structure

or Code monitoring powers and functions associated with the General Insurance Code of

Practice.

The Committee is of the view that if there is confusion within the general insurance industry

or consumers about the purpose and effect of the Code and its obligations on the one hand,

and the resolution of consumer disputes through an external dispute resolution scheme on

the other, then this distinction could either be clarified in the Code or through promotional

activities by relevant organisations.

Issue 13 – Code Enforcement and Sanctions

Whether the Code enforcement and sanctions standards, and to the extent applicable, the

FOS Terms of Reference, the Deed of Adoption and the CCC Charter, should:

(a) be promoted better by Code Participants and FOS;

(b) include sanctions from ASIC RG 183 – see paragraphs 10.154 – 10.155; (c) be amended in accordance with the matters set out in paragraphs 10.159.

The Committee is responsible for its enforcement actions arising from its functions and

powers. Transparency, through the publication of enforcement action taken in certain

circumstances, is considered by the Committee to be an important factor to ensure that

Code Participants are held, and are seen to be held, accountable for their actions.

The Committee also shares ASIC’s view outlined in Regulatory Guide 1832 that community

confidence in the effectiveness of industry codes is largely reliant on the perception that a

Code is seen to be enforced against non-compliant subscribers.

The range of sanctions available to a Code Monitor in its enforcement activity seems to be a

key element in building this confidence, as is the monitoring framework that is adopted.

Consistent with these thoughts and the stated objectives of the Code, the Committee

believes that the publications power in section 7.22 of the Code should be retained. The

Committee believes the power it has to name a Code Participant which has been found to

2

Australian Securities and Investments Commission, 2005, Regulatory Guide 183: Approval Of Industry Codes

Of Conduct, p. 8


have engaged in serious or systemic non-compliance with the Code and/or wilful and

repeated breaches of the Code, is appropriate in all the circumstances.

In responding to Issue 13, the Committee recognises that there is a major distinction to be

drawn between FOS’s role as an EDR scheme, and FOS’s role as monitor of the Code. As

a result, the Terms of Reference of FOS (as an approved External Dispute Resolution

Scheme) are not relevant to the consideration of the enforcement or sanctions powers of the

Committee. Issue 14 – Financial Hardship

Whether:

(a) the use of Centrepay as an option for payments should be a Code standard

(b) the Code should contain guidelines for dealing with hardship cases, particularly on

premium payment, excess and debt collection;

(c) if so, whether the guidelines should cover the criteria for hardship and the available

outcomes During the course of monitoring compliance with the Code, the Committee has identified

instances of non-compliance with the Code’s obligations concerning dealing with customers

and uninsured third parties who may be in financial hardship.

The Committee believes that all Code Participants should have rigorous processes in place

in relation to their financial difficulty obligations under the Code. The Committee submits

that this area of obligation is intrinsically linked to one of the core objectives of the Code

concerning insurer – customer relationships. How an insurer deals with customers in

financial difficulty in terms of fairness and compassion is seen as very important to the

achievement of the Code’s objectives and goes to the heart of its effectiveness. Many

people often judge the industry by how compassionately and fairly it deals with the most

vulnerable and disadvantaged members of the community.

The Committee also recommends that Code Participants recognise the importance of the

content, language and delivery of financial hardship training to their employees in relation to

third party debt and motor vehicle claims and review it if necessary.

The Committee supports the development of guidance on for dealing with hardship cases;

the criteria for hardship and available outcomes.


2. There are a range of different models that could be explored by the Independent Reviewer which offer an effective governance framework for Code monitoring and administration functions.

Issue 15 – Natural Disasters

Whether:

(a) the Code should be able to be varied by the ICA in an extraordinary catastrophe

or disaster;

(b) the definition of catastrophe or disaster is appropriate and sufficiently specific;

(c) the criteria in the ICA Disaster Declaration Guidelines are appropriate and

sufficiently specific;

(d) the consequences are appropriate

Whether the Code should:

(a) be amended in relation to the matters in paragraph 10.173, namely that insurers

should clarify the benchmarks they intend to adhere to in a natural disaster;

b) require Code Participants to have a natural disaster response plan which

complies with minimum agreed standards. The Committee notes that some matters related to natural disasters and the Code were the

subject of recommendations in the FOS Queensland Floods Survey Report.

In particular, the Committee supports the codification of the obligation for a Code Participant

to have a disaster response plan. Issue 16 – Code Governance

Whether Code governance and the roles of the ICA, ASIC, FOS and the CCC should:

(a) be promoted better by Code Participants, the CCC and FOS;

(b) best structure and coordinate the roles of FOS, the CCC and ASIC;

(c) reflect the issues raised in paragraphs 10.149, 10.162 and 10.174;

(d) be amended in the Code and related constitution documents to implement the matters

in paragraphs 10.181 and 10.182, namely:

i) CCC appointments be conducted in the same fashion as FOS Panels;

ii) CCC takes on record keeping, investigative compliance and reporting roles. As a general principle, the Committee believes that a governance model which includes the

active participation of consumer and industry representatives in the oversight of the Code’s

administration and monitoring functions and which is independent of the sponsoring industry,

has significant benefits for the effective administration of a Code of Practice and seems to

enhance stakeholder confidence in the Code’s operations.


In preparing this submission, the Committee has considered how to capture and publish

the experience of the Committee in monitoring compliance with the Code. The

Committee requests that this important function be formally recognised.

The Committee notes that clause 3.1 (c) Schedule 1 of the Deed of Adoption, states that

the Chair of the CCC is jointly appointed by, and not a member of either of, the boards of

ICA and FOS. This is also reflected in section 7.13 of the Code.


Schedule 4 - KPI Report for the period 1 July 2012 to 30 June 2013

A: Committee Response to a Report from FOS - Sections 7.13 – 7.23 of the

Code

Sections 7.14 to 7.23 of the Code set out the obligations of the Committee in responding to a report from FOS of a failure by a Code Participant to correct a Code breach.

Number of reports

received

Average business

days to meeting

Number of instances

exceeding 15

business days

(i) Within 15 business days of the receipt of an FOS report the Committee shall

meet to consider the FOS report. 0 0 0

Number of reports

received

Average business

days to meeting

Number of instances

exceeding 30

business days

(ii) Within 30 business days of the receipt of an aggregated data report pursuant to

Section 7.9 of the Code, the Committee shall meet to consider the FOS aggregated

data report.

4 7 0

[These timeframes include an allowance for any further enquiries that the Committee may wish to initiate and to consider the outcome of those enquiries.] [Section 7.15]

Number of findings Average business

days to notification

Number of instances

exceeding 5 business

days

(iii) If the Committee accepts the FOS findings it will notify the Chief Executive

Officer (CEO) of the Code Participant in writing of the detailed findings within 5

business days. [Section 7.18(a)]

0 0 0


Number of findings Average business

days to notification

Number of instances

exceeding 15

business days

(iv) If the Committee accepts the FOS aggregated data report, it will act upon any

identified serious or systemic issue within 15 business days of the meeting at which

the FOS aggregated data report was tabled.

0 0 0

Number of

responses

Average business

days to make final

determination

Number of instances

exceeding 10

business days

(v) Within 10 business days of receiving the CEO’s response, the Committee will

consider the response and make a final determination. 0 0 0

[This time frame includes an allowance for a meeting between the Committee and the CEO should the Committee require it.] [Section 7.19]

Number of final

determinations

Average business

days to notify CEO

Number of instances


days

(vi) Within 5 business days of the Committee making a final determination, it will

notify the CEO in writing of its decision and any sanctions to be imposed. 0 0 0

[The Committee will need to consider whether sanctions will come into effect when the CEO receives the notice or following expiry of a reasonable period of time after the notice has been

issued as the Code is silent on this point.]

Date Report Issued


B: Annual Report of the Committee - Clause 6.3 of the Deed

On or before 1 October in each year, the Committee will prepare and give to the

Insurance Council and FOS an Annual Report for the period ending on June 30 in

that year.

29-Sep-12

Date Report Issued

Where the Committee wishes to report on an issue which is too urgent for reporting

to be delayed until the publication of the Annual Report, a specific report will be

prepared dealing with that issue within 15 business days of the meeting at which

the issue was discussed.

n/a

C: Complaints about the Committee - Clause 6.5 of the Deed Number of

complaints

Average business

days for reference to

Chair

Number of instances


days

(i) The Committee will refer a complaint that the Committee has not

acted in accordance with its Charter or the Code, to the Chair of the

Committee within 5 business days.

0 0 0

Number of

complaints

considered by

Chair

Average business

days for

recommendation to

Committee

Number of instances

exceeding 15

business days

(ii) Within 15 business days of the Chair’s receipt of the complaint, the

Chair will consider and/or investigate the complaint, and make

recommendations to the Committee in respect of what, if any, steps

should be taken in respect of the complaint.

0 0 0


Number of

complaints raising

conflicts

Average business days

for appointment of

independent person

Number of instances exceeding 5

business days

(iii) If the Chair believes that the complaint raises issues which

involve the Chair or a member of the Committee in a

conflict of interest then, within 5 days of reaching that

conclusion, the Chair may appoint an independent person

to consider and investigate and make recommendations to

the Committee in respect of the complaint. In this case the

KPI’s in (ii), (iv) and (v) apply to the independent person.

0 0 0

Number of

complaints


for advice to

complainant


business days

(iv) The Committee will advise a complainant of its

determination within 5 business days. 0 0 0

Number of reports

for FOS & ICA


for report following

determination


business days

(v) Should the Chair decide that it is appropriate to report the

complaint and its outcome to FOS and the Executive

Director of the Insurance Council then the Chair should do

so within 5 business days of the determination being

reached.

0 0 0

D: Terms of Reference of FOS - Clause 6.6 of the Deed

Number of requests

for provision of

information


for provision of

information

Number of instances exceeding

10 business days

If FOS requests the Committee to provide information relating to matters

considered or being considered by the Committee which may be

relevant to issues being considered by FOS, this information should be

provided to the FOS within 10 business days.

0 0 0


E: Notice to FOS - Clause 4.2 of the Committee Charter

Number of

sanctioned

determinations


for Board notification


business days

If the Committee determines to impose a sanction on a Code Participant

under clause 7.20 of the Code, the Committee should notify the Board

of FOS of that fact and provide a description of the sanction within 5

business days.

0 0 0

F: Issues of significance - Clause 4.3 of the Committee Charter

Number of

systemic issue

decisions


for provision of

information


business days

If the Committee decides to provide to the Board of FOS general

information in relation to any systemic issue of which it believes the

Board of FOS should be made aware, then the Committee should do so

within 5 business days.

0 0 0

G: Convening meetings - Clause 7.1 (b) of the Committee Charter Number of meetings held

The Committee must meet not less than four times a year.

6


Schedule 5 - List of Code Participants as at 30 June 2013

General Insurers

1. AAI Ltd5

2. ACE Insurance Ltd

3. AIG Australia Ltd 6

4. AIOI Insurance Co Ltd

5. Allianz Australia Insurance Ltd

6. Ansvar Insurance Ltd

7. Assetinsure Pty Ltd

8. Australian Alliance Insurance Company Ltd

9. Australian Associated Motor Insurers Ltd

10. Auto & General Insurance Company Ltd

11. AVEA Insurance Ltd

12. Calliden Insurance Ltd

13. Catholic Church Insurance Ltd

14. CGU Insurance Ltd

15. Chubb Insurance Company of Australia Ltd

16. Commonwealth Insurance Ltd

17. Credicorp Insurance Pty Ltd

18. Defence Service Homes Insurance Scheme

19. FM Insurance Company Ltd

20. Genworth Financial Mortgage Insurance Pty Ltd

21. GIO General Ltd

22. Great Lakes Re-insurance (UK) PLC

23. Guild Insurance Ltd

24. Hallmark General Insurance Company Ltd

25. HBF Insurance Pty Ltd

26. Insurance Australia Ltd

27. Insurance Manufacturers of Australia Pty Ltd

28. LawCover Insurance Pty Ltd

29. Lloyd’s Australia Ltd

30. Medical Insurance Australia Pty Ltd

31. Mitsui Sumitomo Insurance Co Ltd

5 Formerly Vero Insurance Ltd 6 Previously known as Chartis Australia Insurance Limited


32. MTA Insurance Ltd

33. Mutual Community General Insurance Proprietary Ltd

34. NIPPONKOA Insurance Company Ltd

35. NTI Ltd

36. OnePath General Insurance Pty Ltd

37. Progressive Direct Insurance Pty Ltd

38. QBE Insurance (Australia) Ltd

39. QBE Lenders’ Mortgage Insurance Ltd

40. RAA Insurance Ltd

41. RAC Insurance Pty Ltd

42. RACQ Insurance Ltd

43. RACT Insurance Pty Ltd

44. Sompo Japan Insurance Inc

45. Southern Cross Benefits Ltd

46. St Andrew’s Insurance (Australia) Pty Ltd

47. Suncorp Metway Insurance Ltd

48. Sunderland Marine Mutual Insurance Company Ltd

49. Swann Insurance (Aust) Pty Ltd

50. Territory Insurance Office

51. The Hollard Insurance Company Pty Ltd

52. The Tokio Marine & Nichido Fire Insurance Co Ltd

53. Virginia Surety Company Inc

54. Wesfarmers General Insurance Ltd

55. Westpac General Insurance Ltd

56. XL Insurance Company Ltd

57. Youi Pty Ltd

58. Zurich Australian Insurance Ltd


Lloyd’s Australia Limited: Participating Coverholders and Third Party

Administrators

59. AFA Pty Ltd

60. AIS Insurance Brokers Pty Ltd

61. Altiora Insurance Solutions Pty Ltd

62. AON Risk Services Australia Ltd

63. Arch Underwriting at Lloyd's (Australia) Pty Ltd

64. ASR Underwriting Agencies Pty Ltd

65. ATC Insurance Solutions Pty Ltd

66. Austagencies Pty Ltd

67. Austbrokers Sydney Pty Ltd

68. Australian Income Protection Pty Ltd

69. Australis Group (Underwriting) Pty Ltd

70. Austruck Insurance Pty Ltd

71. Axis Underwriting Services Pty Ltd

72. Beazley Underwriting Pty Ltd

73. Bizcover Pty Ltd

74. Brooklyn Underwriting Pty Ltd

75. Catlin Australia Pty Ltd

76. Cemac Pty Ltd

77. Cerberus Brokers Pty Ltd

78. Cerberus Special Risks Pty Ltd

79. Cheap Travel Insurance Pty Ltd

80. Cinesure Pty Ltd

81. CKA Risk Solutions Pty Ltd

82. Claim Adjustment Partners Pty Ltd7

83. Columbus Direct Travel Insurance Pty Ltd

84. Corporate Services Network

85. Coverforce Underwriting Pty Ltd

86. Crawford & Company (Australia) Pty Ltd

87. DCS Asia Pacific

88. DLA Piper Australia8

89. Dolphin Insurance Pty Ltd

90. Dual Australia Pty Ltd

7 Trading as Steeley C.A.P 8 Previously DLA Phillips Fox


91. Echelon Australia Pty Ltd9

92. Edge Underwriting Pty Ltd

93. Elkington Bishop Molieaux Brokers Pty Ltd10

94. Epsilon Underwriting Agencies Pty Ltd

95. Fenton Green & Co

96. Fitton Insurance (Brokers) Australia Pty Ltd

97. Freeman McMurrick Pty Ltd

98. Gallagher Bassett Service Pty Ltd

99. Gow-Gates Insurance Brokers Pty Ltd

100. Guardian Underwriting Services Pty Ltd

101. High Street Underwriting Agency Pty Ltd

102. Horsell International Pty Ltd

103. HW Wood Australia Pty Ltd

104. IBL Limited11

105. Indemnity Corporation Pty Ltd

106. Insurance Advisernet Australia Pty Ltd

107. Insure That Pty Ltd

108. Jardine Lloyd Thompson Pty Ltd

109. JMD Ross Insurance Brokers Pty Ltd

110. JUA Underwriting Agency Pty Ltd

111. Latitude Underwriting Pty Ltd

112. Lawsons Underwriting Australasia

113. Logan Livestock Insurance Agency Pty Ltd

114. London Australia Underwriting Pty Ltd

115. Magic Millions Insurance Brokers Pty Ltd

116. Mansions of Australia Ltd

117. Manufactured Homes Insurance Agency Pty Ltd

118. Marsh Pty Ltd

119. Millennium Underwriting Agencies Pty Ltd

120. Miller & Associates Insurance Broking Pty Ltd

121. Miramar Underwriting Agency Pty Ltd

122. National Underwriting Agencies Pty Ltd

123. Nautilus Marine Insurance Agency Pty Ltd

10 Trading as EBM Insurance Brokers 11

Trading as Planned Professional Risks Underwriting Agency


124. Newmarket Insurance Brokers Pty Ltd

125. Nova Underwriting Pty Ltd

126. Online Insurance Brokers Pty Ltd

127. Pacific Underwriting Corporation Pty Ltd

128. Panoptic Underwriting Pty Ltd

129. Parmia Pty Ltd

130. Pataenius Australia Pty Ltd

131. PI Direct Insurance Brokers Pty Ltd

132. Proclaim Management Solutions Pty Ltd

133. Professional Risk Underwriting Pty Ltd

134. QBE 386

135. QBE Placement Solutions Pty Ltd

136. Resource Underwriting Pacific Pty Ltd

137. Richard Oliver Underwriting Managers Pty Ltd

138. Savannah Insurance Agency Pty Ltd

139. SLE Worldwide Australia Pty Ltd

140. Specialist Underwriting Agencies Pty Ltd

141. Sportscover Australia Pty Ltd

142. SRS Underwriting Agency Pty Ltd

143. Starr Underwriting Agents (Asia) Ltd

144. Sterling Insurances Pty Ltd

145. SureSave Pty Ltd

146. Tasman Underwriting Pty Ltd

147. Transcorp Underwriting Agency Pty Ltd

148. Travel Insurance Direct Pty Ltd

149. Trident Insurance Group Pty Ltd

150. Trinity Pacific Underwriting Agencies Pty Ltd

151. Winsure Insurance Group Pty Ltd

152. Woodina Underwriting Agency Pty Ltd

153. World Nomads Group Ltd