Need to know
- A recent investigation found that one in six complaints to a group of general insurers somehow got lost in the shuffle
- Many insurance companies aren’t monitoring complaints to recognise systemic issues
- The failure of insurance companies to engage with customers who complain has led to a surge in cases that end up with the Australian Financial Complaints Authority
When you lodge a complaint with your insurance company, they're supposed to have a look at it and get back to you within 30 days.
The idea is that your insurer will resolve the issue so you don't have to escalate the matter to the Australian Financial Complaints Authority (AFCA). But in many cases, that's not happening.
A recent investigation by the Australian Securities and Investments Commission (ASIC) found that one in six complaints to the 11 general insurers under review somehow got lost in the shuffle, meaning policyholders were left hanging.
Financial counsellors are lodging complaints with the insurance company and AFCA at the same time under the assumption that the insurer probably won't respond
The failure of insurance companies to engage with customers who complain has led to a surge in cases that end up with AFCA. They grew by 50% in the 2022–23 financial year, and went up again in 2023–24.
It's gotten to the point where financial counsellors acting on behalf of policyholders are lodging complaints with the insurance company and AFCA at the same time under the assumption that the insurer probably won't respond.
Insurers failing to lift their game
It's not a good look for the industry, considering that ASIC put insurers on notice to improve their internal dispute resolution processes following the 2022 Queensland and New South Wales floods.
"Consumers have a right to expect that their complaints will be identified and handled in a fair, timely and effective manner," says ASIC Commissioner Alan Kirkland.
When insurers fail to identify complaints, they risk prolonging the distress of customers, especially those dealing with extreme events like floods
ASIC Commissioner Alan Kirkland
"When things go wrong, the complaints process provides an opportunity to get them back on track. When insurers fail to identify complaints, they risk prolonging the distress of customers, especially those dealing with extreme events like floods."
Failure to identify systemic issues
The ASIC investigation unearthed another troubling fact – many insurance companies aren't monitoring complaints to recognise patterns.
The group of insurers under review – which included major players such as Allianz, RACQ, QBE, Hollard and Youi – found only 85 systemic issues from over 1.4 million complaints. By contrast, AFCA earlier identified 11 systemic issues from 16,000 complaints it had taken on – a much higher percentage. Half the insurers in the ASIC review found no systemic issues at all.
"Proactively identifying and addressing systemic issues is critical to preventing other consumers from experiencing the same problems. It also reduces downstream remediation and business costs, benefitting both insurers and their customers," Kirkland says.
Our advice is that if you do complain, make sure you are very, very clear in the language you use
Insurance expert Vicki Staff
Insurance expert Vicki Staff from Financial Counselling Australia says the organisation is "disappointed but not surprised" by the findings.
"When financial counsellors speak to the community about insurance, we tell people that if you are unhappy with your insurer, make a complaint," Staff says.
"The problem is this report shows that if you do complain, your complaint may go nowhere. Our advice is that if you do complain, make sure you are very, very clear in the language you use.
"Say something like 'I want to make a formal complaint', because if you are not direct, they may not pick up on the cues."
Of over 4.7 million complaints reported by financial firms of all types to ASIC from 1 July 2023 to 30 June 2024, general insurance products were subject to the most complaints, accounting for 33% of the total.
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