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Insurance industry is failing to protect consumers, committee finds

A SCATHING parliamentary report has found that the rights of consumers are not adequately protected in the insurance contracts many homeowners take out for peace of mind.

As attention was fixed on the Labor leadership, the Legal Affairs Committee tabled its report on natural disaster insurance arrangements which found gaping holes in the regulation of the insurance industry

The committee's chair, Labor backbencher Graham Perrett, said the inquiry had found that "the insurance claim process had a detrimental effect on people already devastated by trauma and loss".

"Unfortunately there are no regulations that compel insurance companies to do the right thing by their clients and resolve claims in a timely and satisfactory fashion," Mr Perrett said.

The report makes 13 recommendations to provide "much-needed consumer protections", including to strengthen the industry code of practice and make it compulsory across the industry.

It recommends that the corporate watchdog, the Australian Securities and Investments Commission, "name and shame" insurers who breach the code of practice.

The report says all consumers should have the option of taking out a general insurance policy for standard cover, and that the rising cost of premiums needs to be addressed.

The report says the Australian insurance industry faced unprecedented pressures from the Victorian bushfires and the Queensland floods.

"Nonetheless, these events exposed the weakness in the self-regulation of claims-handling in the general insurance industry," Mr Perrett said.