ASIC review finds insurers need to improve claims handling

ASIC is calling on general insurers to improve their claims handling practices and resourcing after a review of home insurance claims found weaknesses across five key areas.

ASIC’s Report 768 Navigating the storm: ASIC's review of home insurance claims (REP 768) assessed claims handling practices to coincide with the commencement of general insurers’ obligation to manage claims efficiently, honestly and fairly from January 2022. The review looked at data from more than 218,000 claims lodged between January and March 2022 from six insurers that cover 63% of the Australian home insurance market.

The insurers that participated in the review are:

• AAI Limited (Suncorp) (including AAMI, APIA, GIO, Shannons, Suncorp and Vero)
• Allianz Australia Insurance Limited (including Allianz and TIO)
• Auto & General Insurance Company Ltd (including Budget Direct, ING and Virgin)
• Insurance Australia Group, which includes Insurance Australia Limited and Insurance Manufacturers of Australia Pty Limited (including CGU, Coles, NRMA, SGIC, SGIO, WFI and RACV)
• QBE Insurance (Australia) Limited (including QBE, ANZ and Elders), and
• Youi Pty Ltd.

This review is part of ASIC’s ongoing work in relation to insurance claims handling. Insurers need to ensure their claims handling and dispute resolution functions are adequately resourced and sufficiently trained in order to meet their regulatory obligations as well as the standards in their voluntary General Insurance Code of Practice.

Deputy Chair Karen Chester said, “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”.

“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.

REP 768 identified five areas for improvement:

• 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, and
• better resourcing of claims handling and dispute resolution functions.

ASIC examined all home insurance claims lodged with the six participating insurers between January and March 2022, and followed those claims through the claim handling life cycle for a further six months.

The claims reviewed show that the insurers were unsurprisingly facing pressures due to severe weather events during and prior to this period.

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.