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Wednesday, February 25, 2015

Assessing the ICNZ Revised Fair Insurance Code - Part 1

Now we get to the nitty-gritty. If a paragraph by paragraph analysis isn't your thing come back next week, when we will be looking at the important stuff that was left out of the Revised Code.

Click on the link to continue reading.

The layout used for the analysis is to first state the general heading given in the Revised Code, followed by the paragraph number and text and then an analysis of it. A copy of the Revised Code can be downloaded from here.

About the Fair Insurance Code

Paragraph 1:

    1. The Fair Insurance Code is a code of practice that sets minimum service standards for insurance companies

    2. describes the responsibilities that you and your insurance company have to each other, and

    3. encourages professionalism in the insurance industry

The third bullet point states the Revised Code “encourages professionalism in the insurance industry”. Without knowing what is meant by professionalism it is easy to see this as just feel-good padding.

It is not apparent that the Revised Code does anything concrete to encourage, let alone achieve, professionalism. Paragraph 8 might be part of that intention but, as the comments on Para. 8 show, it fails to deliver anything that could be considered professional.

Paragraphs 2 to 6: No comment.

Paragraph 7:

We will comply with this Code and fulfil our obligations under the laws and regulations that govern the insurance industry. This Code takes effect from 1 January 2016.

For the purposes of the Revised Code this paragraph need only state that insurers will comply with the Code and give the date on which it comes into effect. Fulfilling legal obligations is not optional, and the laws and regulations that affect insurers go wider than those that govern the insurance industry.

Our general responsibilities to you

Paragraph 8:

We are committed to high standards of service.

A meaningless statement. What are the standards, and how can they be measured? Certainly not the pathway to professionalism referred to in Para. 1. above

There are International Standards Organisation (ISO) standards for customer service, complaints handling and quality control. At the local (Australasian) level there are AS/NZS standards. Not suitable, why not arrange for such standards to be developed?

If the insurance industry were genuinely committed to customer service they would take on the responsibility of providing customer services that were externally verified and monitored. While cost could be cited as a prohibiting factor for insurers, one wonders whether they are yet willing to commit to transparency and accountability on terms other than their own.

On page 2 of the Revised Code we are told that the insurance industry “is a major sector employer in its own right.”. This being so one would wonder why there is an absence of recognised quality standards in the Revised Code.

The comments to Para. 10 apply here also.

Paragraph 9:

    1. We will act honestly, fairly, transparently and with utmost good faith towards you. We will answer your questions accurately and in writing if requested

    2. explain the information you need to give us when you apply for insurance, renew your policy, or make a claim

    3. explain the importance of you giving us information that is honest, complete, up to date and relevant

    4. give you access to your policy wording, which sets out in plain English what is insured, what is not insured and what your obligations are, and

    5. tell you about any changes to your policy.

The term “utmost good faith” occurs for the first time but is not defined (see a recent post here for more on this concept, and how insurers do not act in utmost good faith). 

The word “fairly” is problematic. See the comments on Para. 13 that will appear in the next post and the recent post here.

What does “transparently” mean? As the Revised Code makes no mention of customers’ rights to information under the Privacy Act 1993 there is a failure of transparency from the beginning.

The second point “explain the information …” is undermined by what is spelt out later in the Revised Code (FAQ question 8). This will be dealt with later. 

The fourth bullet point “give you access to your policy wording ...” is a very strange one. Surely the insurer will give the customer a policy document and that document will be set out in plain English?

The fourth bullet point again – what is meant by plain English? How is it defined and who will define it? In New Zealand there is an organisation called Write Mark that has criteria for plain English documents. Will that be used? If not, what else? Considering the problems insurance documents have caused in the past, insurers are the least competent to create plain English documents unassisted.

Paragraph 10:

We will train our staff and our agents so they can fulfil their responsibilities to you. Their training will include the requirements of this Code and information about our products, and may also include principles of insurance and relevant consumer laws.

A dubious statement. The second sentence makes it optional for staff to be trained in “relevant consumer laws”. Surely front line staff must be trained to know the provisions of the law as it effects insurance contracts? If they were untrained in this, then customers might be mislead or wrongly guided when applying for insurance or some subsequent activity. Will insurers take full and unequivocal responsibility for the ignorance of their staff?

Not only is training in consumer laws relegated to being optional, there is no mention of the Privacy Act or the Human Rights Act1. If it is not an obligation of the Revised Code for insurers to train their staff in statutory requirements then the statements about quality  made in Paras. 8 and 9 above are undermined. In the absence of staff equipped to understand customer rights and needs, and insurer obligations, the problems and grief experienced in the past will continue.

A major complaint against insurers is the conduct of their staff and the difficulties experienced by claimants when faced with badly behaved, antagonistic or perpetually unavailable staff members. This has not been addressed. The revised Code should show the industry's willingness to ensure claimants are protected from inadequate or poorly performing staff .

Paragraph 11:  

You are entitled to ask for and receive clarification on the terms, conditions and exclusions of your insurance policy. We will communicate clearly, concisely and effectively with you. We will take all reasonable steps to assist people with disabilities, or for whom English is a second language.

This seems okay on the face of it, but the first sentence potentially runs counter to what is stated in FAQ 8 (to be covered in a later post).

Good communication would be welcome but how this is to be achieved, and what constitutes reasonable steps, needs to be clearer. For instance would it be reasonable, or unreasonable, to have policy documents in languages other than English? Maori perhaps? It is an official language of New Zealand.

Paragraph 12:  

You are entitled under privacy laws to ask us for information we hold on our records about you.

The reference to privacy laws is not literally correct – perhaps uncertainty on the part of the drafter? There is one law covering privacy – the Privacy Act 1993. For the sake of clarity (plain English) the reference should be specific.

The sentence also does not reflect the intent of the Privacy Act 1993. The sentence states “... to ask us for information we hold on our records about you.” A sentence that complies with the Act would read “... to ask for, receive, and have corrected by us information we hold on our records about you in accordance with the Privacy Act 1993”. Wordy – yes2, but it is in accord with the Act.

 

1  There is reference to making complaints to the Human Rights Commissioner in Para. 45 but that is a defensive/reactive rather than proactive stance.

2  Note that three pages at the end of the document are dedicated to explaining and justifying the Revised Code so a bit of clarity on statutory rights and responsibilities isn't going to expand the document excessively.

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