You buy insurance as a safeguard and probably hope you will never need it. But if you do need to make a claim, no one wants to be treated as a criminal.
The Australian Securities and Investments Commission (ASIC) has blasted “harmful” and “hostile” claims investigation practices by a number of insurers.
The regulator said that some claim investigations were causing significant consumer harm, eroding trust in insurance and were lacking fair process.
“Consumers expect a fair process to be followed when a claim is investigated,” ASIC said. “Consumers in our research whose claims were investigated and eventually paid felt angry, frustrated, confused, overwhelmed and helpless during investigations.
“Some consumers experienced difficulty contacting their insurer, hostile interviews, onerous information requests and inadequate support.”
ASIC was investigating complaints relating to car insurance claims following recommendations made by the financial services royal commission.
In its report, Roadblocks and roundabouts: A review of car insurance claim investigations, it said investigators targeted “mostly valid claims” and that data revealed only four per cent of all claims investigated were declined due to fraud. In all, 71 per cent were paid, 15 per cent withdrawn and 10 per cent declined for some other reason. Further, of the 1.6 million claims made in the 12-month period from September 2016, only 4.85 per cent were investigated.
ASIC said that investigation standards in the General Insurance Code of Practice that were proposed by the Insurance Council of Australia (ICA) did not go far enough and is demanding further improvements.
ASIC listed the following faults with the system:
- some consumers weren’t notified that an investigation had started, received limited information about what they could expect from an investigation, and had difficulty getting information about how their claim was progressing
- 25 per cent of claims took two months to finalise and only some insurers provided a hire car for a few weeks
- some consumers were declined further insurance even though their claim was found to be valid and paid, making it difficult to get further insurance
- investigators made them feel like criminals.
ASIC reviewed Allianz, IAG, Auto and General, Suncorp’s consolidated AAI subsidiary and Youi for its report.
It found 21 per cent of Auto and General’s paid and investigated claims took more than four months to resolve, 10 per cent of IAG’s took more than four months and four per cent of Allianz’s claims that were eventually paid took more than four months to resolve. Only two per cent of Suncorp’s paid and investigated claims took more than four months.
ICA spokesman Campbell Fuller told insuranceNEWS.com.au: “Insurers believe most investigations are conducted fairly and transparently, but ICA acknowledges a small number of consumers should have received better customer service.”
The Financial Rights Legal Centre says the industry should act immediately and rein in its investigators.
“We regularly hear from consumers subjected to threats, bullying behaviour and harassment by unregulated insurance investigators,” said casework director Alexandra Kelly.
“Consumers endure incredibly long interviews – sometimes over five hours – routinely describe being treated like criminals, and many with poor English skills are not given access to appropriate translators.
“We have been waiting now for a new set of standards for almost three years.
“The general insurance industry needs to introduce a strong and comprehensive set of best practice standards for insurance investigations to restore trust and confidence in the insurance industry.”
ASIC commissioner Sean Hughes said insurers were putting a significant proportion of consumers through a harmful and unreasonable process, even where their claims are ultimately paid.
“When it comes to insurance, consumers should expect and do deserve better. Consumers deserve a fair process for investigated claims. Insurers must live up to the promise to pay on the policy where the claim is a genuine one,” Mr Hughes said.
Consumers who are unhappy with how their claim is being handled are encouraged to contact their insurer’s internal dispute resolution team.
If they are unhappy with their insurer’s response, they should complain to the Australian Financial Complaints Authority.
Have you ever had issues making a car insurance claim? Or any other insurance claim? Did you complain to the relevant authority?
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