The Business Council of Co-operatives and Mutuals (BCCM) has unveiled its first voluntary code of conduct for operators of discretionary mutual funds (DMFs), amid renewed interest in the risk protection schemes as alternatives to traditional insurance products.
Earlier this week, BCCM launched the good practice guide, having taken about a year to develop the document after the Australian Small Business and Family Enterprise Ombudsman completed its DMF inquiry.
In a press release, it highlights that there has been a renewed interest in DMFs as a substitute for conventional insurance, in response to surging premiums and a series of natural disasters.
BCCM Chief Executive Officer Melina Morrison noted that regular economic cycles and shocks, as well as longer term environmental and social trends, are making risk management more challenging.
“As insurance markets harden, an increasing number of sectors across the economy are being impacted by a lack of access to appropriate risk protection.
“DMFs offer an alternative, providing financial protection in the event of a broad range of property loss or damage and third-party liabilities.”
DMF products, whilst having many similarities to insurance products, are not contracts of insurance because the cover is provided on a discretionary basis.
Responding to a request from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), the BCCM has launched a guide on Principles, Code of Conduct and Good Practices for DMFs.
Last year, the ASBFEO conducted an inquiry into the insurance crisis faced by Australia’s amusement, leisure, and recreation sector, and found that DMFs were the most durable and practical solution.
Morrison, added: “The humble country show was just the tip of the iceberg. There’s a growing list of sectors and situations where conventional insurance is either unaffordable or inappropriate.”
Moreover, the Code of Conduct sets out a list of 20 principles including to place the interests of members first at all times, provide empathetic claims handling and good governance and to have an effective board of directors with the appropriate range of experience, knowledge and skills.
The code also sets out 42 good practices in relation to structure, board, management, audit and risk, finance and compliance that underpin the operation of sustainable, member-focused DMFs.
