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Australia’s insurance industry is undergoing the biggest regulatory and compliance changes in its history, and these changes will significantly impact investigation teams.

The Insurance Council of Australia (ICA) has released a new General Insurance Code of Practice, and all insurers were required to implement the changes by July 1, 2021. The changes are legally binding and, as of July 1, 2021, organisations can be fined for non-compliance. These fines can amount to hundreds of thousands of dollars.

To avoid penalties and compliance headaches, insurers will need to change their business to comply with the new regulations, which must be met in their entirety, as opposed to a piecemeal approach. The new Code is a result of a two-year review by the ICA, which invited input and recommendations from various organisations.

Australia’s insurance industry leaders must act now to bring their investigation teams, and the wider organisation, in line with the changes. Investigation teams will be pressured by the more detailed compliance requirements, but this does not mean there are no business imperatives.

Polonious’ report, New General Insurance Code of Practice: A reference guide to how changes will impact fraud investigations, gives insurance industry leaders an overview of the required changes, and details of how the impending requirements can go a long way to benefiting the business.

I this blog, we will look at what changes for investigation teams.

Teams must adapt immediately

The Insurance Council’s Code of Practice changes will have an immediate impact on investigation teams and how they conduct their work, including much more detailed measurements of the actions being taken.

An extensive summary of the Code of Practice can be downloaded from the Web site. The many changes to the Code of Practice will apply significant pressure on insurers’ investigation units, including:

  1. Stricter requirements in relation to actions being taken by the investigators (e.g. 90-minute time limits
    For investigation interviews)
  2. More mandated regulation which will override any self-regulation, with penalties for non-compliance
  3. A push for more transparency for claimants

To cite a simple, but profound, example, there will now be a cap of 90 minutes on the length of an interview that an investigator can undertake. Previously, there was no time limit. Moreover there is a total limit of four (4) hours during the complete course of the investigation.

Changes such as these will apply a degree of pressure on insurers to get the information they need within that timeframe so they don’t fall foul of the requirements.

Having an unlimited amount of time previously meant that investigators did not need to worry about the pace of the interview. Now, if they go over that allotted time, they will need to explain why, and justify it.

Collecting all the necessary details to make a determination of a claim in 240 minutes of allowed interview time will be challenging in complex cases, so investigators will need to be better prepared in order to meet those strict requirements.

Should they need more time, the investigator will need to ask permission from insurers to extend the interview time and will need to record the agreement and the reasons behind it.

In another example, Part 15 of the new Code speaks to the claims investigation standards. In paragraph 73 it states, “If we appoint someone to investigate your claim, then within 5 business days, we will inform you of their appointment and what their role is”.

These are just a few of many requirements specified for investigation teams in the new Code.

What triggered the changes?

The changes come after the Insurance Council of Australia identified a number of failings in the investigation industry which have resulted in claimants being treated in an unfair manner. And little has been done to address this, despite many opportunities to do so in recent years.

Previously, the industry was self-regulated, which didn’t lead to the changes the industry needed. Neither did it bring any well-defined rules. It remains to be seen if existing investigation units will be capable of meeting the new requirements as insurers typically have thousands of investigations running at any given time.

The reforms are also designed to create more openness and transparency for the claimant, with clearly defined processes requiring strict compliance. Investigators not informing the claimant of the progress of their claim, or their obligations around the investigation, can lead to many people dropping out of a claim. If the process drags on indefinitely, many people just want it to end and will withdraw the claim.

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