Insurance standards code rendered toothless

A new code from the insurance industry that sets out the minimum standards that customers should expect when making claims looks to be something of a paper tiger.

The code states, among other things, that insurers should respond to policyholder letters within two weeks or 10 working days. But whilst the code itself will be binding on the Association of British Insurers' (ABI) members from January, co-operation with the monitoring of the code will not.

Member companies will be asked to provide their own information on recent claims so the ABI can benchmark their performance against the code, but are under no obligation to co-operate.

This begs obvious questions about how the code can be binding if companies don't have to release information on their compliance.

The ABI's Malcolm Tarling said companies would want to provide the information of their own accord because getting a good benchmarking score would give them a competitive advantage. He points to the fact that 80% of motor insurers have already agreed to participate in the first study as proof. But as the results of the benchmarking will not be released to the public - consumers will only see a general report looking at standards across the industry - it is difficult to see why companies will care about their own score.

A spokesperson for the Consumer's Association said: "The code goes someway towards setting standards for policyholders, but the issue of how the code is policed is a major concern. I expect we'll have to wait and see what happens when claims written since the code's launch start coming in."

Insurance Ombudsman Reidy Flynn agrees it will be some time before the code's effectiveness can be evaluated, but says she hopes it will work, helping to cut the number of complaints received by her office. Around 25% of the complaints that reach the Ombudsman relate to problems with the claims and administration procedures.

The code requires that insurers deal fairly and promptly with you claims. More specifically it states that:

• When a customer first makes a claim, they can expect a response and a response and action from the insurer within five working days

• While a claim is being processed, the customer can expect replies to letters within 10 working days

• Once a claim has been agreed, payment, repair or replacement should take place within 10 days

• On making a written complaint, a customer can expect a written acknowledgement within five working days and a final response within 40.