The Australian corporate regulator says home insurers are failing customers around Australia when it comes to handling their home insurance claims, particularly after major weather events.
The Australian Securities and Investments Commission (ASIC) report reviewed data from more than 218,000 claims lodged between January and March 2022 from six major insurers and found poor practices across the board.
The six insurers, who cover 63% of the Australian market, are Suncorp brands, Allianz, Auto & General brands, IAG, QBE and Youi.
"An insurance claim doesn't have to be handled perfectly, but it must be handled well. Our claims handling review found good practices and poor practices across all six insurers. We identified five areas where insurers can and should make immediate claims-handling improvements – consumer communications, project management, identifying vulnerable consumers and complaints, resourcing of claims and complaints handling," ASIC deputy chair Karen Chester says.
ASIC reviewed all the home insurance claims lodged within the three-month period and followed these claims throughout a six-month life cycle. The period analysed included a time of extreme flooding in New South Wales and Queensland in early 2022.
Insurers must prioritise proactive and clear communication with their customers throughout the claim's life cycle
ASIC deputy chair Karen Chester
"We acknowledge that not all factors that impact claims-handling are under an insurer's direct control. But all five areas we've identified for improvement are within the insurers' control," Chester says.
"Insurers must prioritise proactive and clear communication with their customers throughout the claim's life cycle. Insurers need to have proper oversight of third parties and effective project management of building claims, not outsource this to their customers."
ASIC also says they have commenced several investigations into claims handling practices.
Within the control of insurers
CHOICE senior campaigns and policy advisor Beatrice Sherwood says the focus on customer vulnerability was welcome.
"ASIC's report shows that improvements to claims handling processes are directly within the control of insurers, despite the increased frequency and severity of extreme weather.
"Consumers are frustrated by the increasingly difficult and inconsistent manner in which their claims are being handled after a major disaster. It's clear that insurers are failing to keep up with the changing climate and consumers are bearing the brunt of poor communication, increased delays and complex product design," says Sherwood.
Complaints, complaints and broken promises
Last month the Australian Financial Complaints Authority (AFCA) reported a massive spike in the number of complaints received, with a record high of 97,000 complaints last financial year.
The most frequent cause of complaints to AFCA were delays and other issues in insurance claims handling. Complaints of this type jumped by 76%, while overall general insurance complaints rose by 50%.
In June, general insurers were ordered to pay a total of $815 million in refunds to customers after being called out for overcharging and failing to meet pricing promises made at the time of signing them up to policies.
From the start of 2018, 5.6 million consumers have been affected by 'pricing failures' from major insurance companies, according to ASIC.
Changing climate
The call from ASIC for insurers to do better comes in the wake a research report by CHOICE, the Climate Council, Financial Counselling Australia, the Financial Rights Legal Centre, and the Tenants' Union of NSW that found Australian homes are being left unprotected as insurance becomes unaffordable or unavailable for many.
The report revealed that 87% of policyholders saw their premiums go up at their most recent renewal and found the market was failing homeowners who face difficulty understanding complex policy terms and conditions and continually rising premiums across the sector.
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