Australia's life insurance industry could face tougher regulatory oversight following a parliamentary inquiry into the scandal-ridden sector, The Australian reported March 28.
The parliamentary joint committee on corporations and financial services proposed "unanimous" recommendations including removing insurers' exemption from parts of consumer law, a stricter code of conduct, a series of regulatory investigations into company behavior and giving greater power to regulators.
The proposal would give the Australian Securities and Investments Commission, or ASIC, greater authority to enforce actions against insurers. It also recommends combining the industry's codes of practice into a single mandatory one to be enforced by ASIC. These include codes used by the Financial Services Council and the Insurance in Superannuation Working Group.
Steve Irons, chair of the parliamentary committee, noted self-regulation may not be the most effective approach for the industry.
ASIC has not approved the Financial Services Council's code of conduct, while the Insurance in Superannuation Working Group's code is not compulsory.
Meanwhile, the Financial Services Council pushed back against the committee's proposal to add life insurers into the government's Banking Executive Accountability Regime, which limits bonuses to executives and gives regulators greater power to remove those exhibiting misconduct. The council said the regime was designed for the banking sector and there was "insufficient consultation with the industry" about the proposal.
The government opened the inquiry into the life insurance sector following allegations that Colonial Mutual Life Assurance Society Ltd., a unit of Commonwealth Bank of Australia, used outdated definitions of heart attack to deny claims.
The committee has since uncovered a series of problems in the sector, including anti-competitive sales practices, weak consumer protections and failure of self-regulation by the industry. It has also proposed the industry update definitions in policies regularly to keep up with current medical knowledge and research, the publication noted.