The Australian Securities and Investments Commission (ASIC) is issuing a call to action for general insurers, urging them to improve their claims handling procedures and resource allocation. This directive follows an in-depth examination of home insurance claims, which revealed deficiencies in five critical areas.
The report, Navigating the storm: ASIC’s review of home insurance claims, assessed claims handling practices to coincide with the start of general insurers’ obligation to manage claims efficiently, honestly and fairly from January 2022.
The comprehensive review scrutinised data from more than 218,000 claims submitted between January and March 2022. It involved six insurers that collectively cover 63 per cent of the Australian home insurance market.
Heat on claims handling
In a media release, deputy ASIC chair Karen Chester emphasised the significance of effective claims handling. “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,” Ms Chester said.
“Importantly, all five areas we’ve identified for improvement are within the insurers’ control. Improving claims handling practices and resourcing will make an immediate and positive difference to consumers when it matters most – making a claim on their home insurance,” added Ms Chester.
ASIC meticulously reviewed every home insurance claim submitted to the six participating insurers between January and March 2022. Subsequently, these claims were tracked throughout the entire claim handling process for an additional six months.
A significant 43 per cent of the claims examined were linked to severe weather incidents, notably the floods in NSW and Queensland in February and March 2022. The claims reviewed show the predictable challenges insurers encountered due to these severe weather events, both during and preceding this timeframe.
“We acknowledge that not all factors that impact claims handling are under an insurer’s direct control,” Ms Chester said. “But all five areas we’ve identified for improvement are within the insurers’ control.
“This is especially so for supporting and resourcing claims handling and dispute resolution teams in the regrettably ‘new normal’ of frequent severe weather events.
“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.”
Areas that must be improved
The findings revealed both commendable and subpar practices among all six insurers. The five areas that need improvement are:
- better communication with consumers about decisions, delays and complications
- better project management and oversight of third parties
- better recognition and management of expressions of dissatisfaction and complaints
- better identification and treatment of vulnerable consumers
- better resourcing of claims handling and dispute resolution functions.
ASIC also calls on insurers to further analyse the resourcing of claims handling and immediately address under-resourcing of their complaints handling (dispute resolution) functions.
To address these issues, ASIC will write to the six general insurers individually, outlining specific areas needing improvement. The regulatory body also pledged to continue monitoring claims handling practices and taking regulatory action if required.
Looking ahead, ASIC plans to undertake further investigations in 2023/24. With one focus being on potential unfair contract terms related to maintenance and wear and tear issues. And another reviewing the performance of insurers dispute resolution functions.
Furthermore, ASIC has initiated several investigations into insurance claims handling practices, signalling its commitment to ensuring transparency, fairness, and efficiency in the Australian insurance industry.
What do you think of these highlighted areas of improvement? Do you think insurers will respond well to this report? Why not share your thoughts in the comments section below?
Also read: Is your home and contents insurance a waste of money?
