On August 16, the Australian Securities and Investments Commission (ASIC) released Report 768 Navigating the storm: ASIC's review of home insurance claims (REP 768), detailing the results of its assessment of the claims handling practices in relation to more than 218,000 claims lodged between January and March 2022 from six insurers covering 63% of the Australian home insurance market. Of the claims analysed, 43% related to severe weather events including the 2022 floods in New South Wales and Queensland.
In the Report, ASIC has called on general insurers to “manage claims efficiently, honestly and fairly” and “improve their claims handling practices and resourcing” following a number of “weaknesses” which ASIC identified during the review process.
ASIC Deputy Chair Karen Chester said, “an insurance claim doesn’t have to be handled perfectly, but it must be handled well”. Good and poor practices were identified throughout the review, from which five key areas of improvement were identified. These areas include consumer communications, project management, identifying vulnerable consumers and complaints, resourcing of claims and complaints handling.
The review detailed why improvement is necessary with each area:
Consumer communications:
- For better communication with consumers about decisions, delays, and complications
- To allow communications to be transparent and timely
Project management:
- For better project management and oversight of third parties
- For better project management with minimum intrusion and burden
Identifying vulnerable consumers and complaints:
- For better identification and treatment of vulnerable consumers
- To allow better treatment of vulnerability for fairness
Resourcing of claims:
- To allow better resourcing of claims handling and dispute resolution functions
- To allow better resourcing for timeliness and fairness
Complaints handling:
- For better recognition and management of expressions of dissatisfaction and complaints
- To allow better handling of complaints for fairness
Chester elaborated, saying that “improving claims handling practices and resourcing will make an immediate and positive difference to consumes when it matters most, making a claim on their home insurance”.
ASIC acknowledged “not all factors that impact claims handling are under an insurer’s direct control”, however it stated that the identified areas of improvement are within the scope of the insurers’ direct control. Accordingly, “insurers must prioritise proactive and clear communication with their customers throughout the claim’s life cycle”.
ASIC also suggested that general insurers should look to address what it perceives to be a systemic under-resourcing of their complaints handling functions.
The review highlighted five general areas of improvement across the six insurers assessed, with the regulator stating each insurer will be independently contacted and provided with more detail as to how they can improve specific areas of concern.
ASIC has promised ongoing monitoring of claims handling practices and regulatory action when needed, with claims handling identified as a key focus for ASIC in 2023 and 2024. In particular, ASIC has foreshadowed a focus on ‘potentially unfair contract terms relating to maintenance and ‘wear and tear’ issues’ and ‘reviewing the performance of insurers’ dispute resolution functions’.
ASIC also reported there are currently several investigations under way in relation to insurance claims handling practices, a trend which is likely to continue for some time.
Implications
ASIC Report 768 is a timely reminder for the insurers that, in the post Hayne Royal Commission world, insurers’ claims functions have never been under more scrutiny. It would appear to be an opportune time for insurers to head-off future ASIC attention, by ensuring their policy wordings withstand scrutiny through an UCT lens, and ensuring that their claims and IDR processes are streamlined, fair and efficient.
