The Price is right

The Price is right

Long-serving insurance ombudsman John Price has seen a lot of change in the way insurers deal with difficult claims – and with consumers

By Terry McMullan

Fairness” hasn’t always been a guiding precept for insurance claims professionals. The fact that it’s now solidly entrenched in Australian insurance alongside “utmost good faith” owes a great deal to John Price.

The long-serving Insurance Ombudsman is moving into retirement after 17 years deciding on disputed claims and providing feedback guidance to insurers and brokers. However, he intends to continue working part-time with the Australian Financial Complaints Authority (AFCA).

Stepping into retirement: insurance ombudsman John Price

Over that 17 years he has seen some “significant changes” in attitude as claims professionals adjusted to an evolving drive for greater levels of consumer redress. It has been particularly important in the past few years as companies worked through a mass of claims caused by a spate of natural disasters.

“It’s been pretty profound in terms of having the industry embrace the consumer movement,” he tells Insurance News. “There’s a co-operative approach in regards to these things.”

He says the Insurance Council of Australia (ICA) and consumer groups participate openly and in conversations, “working together through the various catastrophes and natural disasters we’ve seen”.

“Sure there’s disagreements, but the community forums starting back after Black Saturday in 2009 have really been an eye-opener in giving consumers a voice and greater visibility. We’ve just grown on that innovation.”

Mr Price was Lead Ombudsman – General Insurance at the Financial Ombudsman Service (FOS) Australia when he was confirmed by AFCA as its Insurance Ombudsman on its formation in late 2018.

AFCA merged the operations of three dispute resolution bodies – the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal into an independent body that it proudly notes is not a government department or agency; nor is it a regulator of the financial services sector.

But it is subject to regular Federal Government reviews, with the first (slightly delayed by the pandemic) being conducted by Treasury at present.

Mr Price, having previously acted as Referee, Adjudicator and a panel chair at FOS, has a long career in the law behind him. He joined Maurice Blackburn in 1978 as a solicitor, rising to become a partner in 1984 and heading up its industrial personal injuries practice until leaving in 2004.

His long list of accomplishments on various Victorian government advisory groups and working parties is accompanied by his contribution to cricket work as a code of conduct commissioner for Cricket Australia, and chair of the Pennant Cricket Appeals Board for Cricket Victoria.

AFCA is now looking for a replacement for Mr Price when he finally steps down from the role in July.

He’ll have plenty to tell his replacement, and the spirit of co-operation between insurers and consumer representatives, along with a willingness to actually get out there and talk to claimants, will doubtless be among the most important.

Mr Price traces the development of a closer insurer-consumer relationship back to the 2009 Black Saturday bushfires and the Queensland floods in 2011. “They are an example of what we can achieve through meetings and just going into people’s homes talking to them and seeing the devastation they’ve suffered,” he tells Insurance News.

“Hearing people’s stories and doing that all in the presence of insurance representatives in a totally transparent way resulted in a significant change in approaches to claims by the insurers.

“It resulted in the early resolution of many of these claims. And we’re now seeing that play itself out in the various catastrophes that have followed.

“In AFCA’s point of view we’re now seeing very few problems resulting from these types of claims. The bushfires [of 2019/20] are a good example. We’ve seen very few disputed claims resulting from that, and those claims that did require attention were very often resolved by a phone call from AFCA to the insurer.”

Mr Price says the insurance industry and AFCA are being more proactive in dealing with such disasters “by being out there and trying to anticipate the issues before they arise”. He says the panels AFCA uses to examine and decide on disputed claims “are extremely well balanced. We have excellent consumer and industry representatives who really do provide balance for us in making decisions.

“I found myself a few weeks ago in a matter where we had three different views being expressed by the three members of the panel. Once we sit down and talk about it, communication shows its value. We can very quickly reach agreement because we’re all very much on the same page – it’s just often being expressed in different ways.”

That doesn’t mean, of course, that the insurance industry will always be uncritical of some AFCA panel decisions, but Mr Price sees that as part and parcel of the job.

“We certainly have issues where the industry might be thinking one way and we’re thinking another way, but that’s to be expected.”

Even in his earliest days as the FOS ombudsman, he didn’t experience “pushback” from the insurers, despite the fact that the relationship with the insurers “was not as strong, open or collaborative as it is today”.

He says he always felt that the ombudsman schemes – starting with Insurance Enquiries and Complaints in the early 1990s, which developed into the Insurance Ombudsman Service (IOS) and then embraced life insurance and banking to become the Financial Ombudsman Service (FOS) – strongly guarded their independence.

“I don’t think that has changed at all. I suspect that early in the piece some in the industry didn’t like the way IOS or FOS dealt with matters, but I don’t think we ever let that compromise our independence or processes.

“Our independence has been there all along. There’s occasional criticism that AFCA is funded by its member organisations, but that’s usually coming from ignorance and not understanding the provisions in place to ensure AFCA’s independence.

Affordability alert: Mr Price believes the cost of insurance is a rapidly rising concern

“What’s important to us is to make people aware that our mission is to be a world-class ombudsman service and to provide fair and efficient and timely dispute resolution processes that are trusted by all. I think that’s vital.”

AFCA is a much bigger operation, with considerable heft given to its reason for existing coming from the Federal Government. The organisation has more than 800 staff with substantial offices in Sydney and Melbourne. It also employs ombudsmen in Western Australia and Queensland.

“We’re recruiting from a much broader pool of people than we used to,” Mr Price says. “All of our ombudsmen in the insurance space are lawyers with extensive experience in the industry. Some like myself have over 40 years’ experience, and some have closer to 50 years. We also have some younger ombudsmen who have worked in the industry, and we even have one who worked in the UK ombudsman’s office.

“So they bring a very broad experience of insurance law – and of fairness, which is a cornerstone of what we do.”

One significant change that he notes has resulted from AFCA’s much higher profile than the services it replaced – the number of files being handled.

The growth in numbers of people contacting AFCA is “a result of the greater levels of publicity AFCA has received through the [Hayne] royal commission and the publicity we’ve received through other events we’ve worked on.

“Our profile is one of our requirements to make people aware of our existence, and also our role in promoting and supporting financial literacy. We had a roadshow going around the country informing people about AFCA. Those are the sort of things that have contributed to community awareness of us and our accessibility.”

While the number of claims filed with AFCA has dropped somewhat in the past year, despite the recent natural catastrophes, Mr Price suggests it may have eventuated because of the COVID lockdowns – “given that actual claims made by people would have reduced”.

One fact that impresses him is the relatively small number of disputes recorded against insurance brokers. “It’s impressive when you consider the thousands of brokers out there, yet we only see disputes in the hundreds. That’s probably because the brokers are doing a damned good job.

“They do need to revise their code of practice. They are at this stage looking a bit antiquated in their approach to things. We’ve seen the life insurers, the general insurance industry and the banking industry all update their codes, so I think the brokers do need to come up to speed.”

It’s a tougher deal for insurers, who must deal with a massive variety of claims from across the spectrum. But Mr Price says the concept of fairness is seen as a consideration “more and more”.

“We often saw a lot of justified criticism about insurers cash-settling claims, but now we see that insurers are providing an additional amount of 10-15% for contingencies in cash settlements that may not be covered in quotes.”

We’ve also seen the industry’s approach to post-catastrophe claims resulting in “very very fair” decisions.

An example: as the summer bushfires were raging a resident in the danger zone called his insurer when he realised his home insurance policy had lapsed a couple of months previously. “The insurer was prepared to re-insure them even though the place was in a fire area. That wouldn’t have occurred years ago.

“We’ve seen the insurance industry react to claims around domestic violence by responding positively to situations where the co-insured has been disadvantaged. There’s a High Court decision suggesting that the sin of one co-insured affects the whole policy. In my view that is unfair in these circumstances, and the insurers have embraced that view. I think that’s a totally different attitude.

“We regularly see circumstances where the insurers are trying increasingly to find a way to pay something on a problematical claim, so in that sense we’re seeing a big change in attitude by the industry. There’s a greater preparedness to listen rather than simply follow the blackletter-strict interpretation that existed in the past.”

Much of that improvement can be attributed to the more open communication between the industry and the consumer movement, plus regular discussions on claims issues with senior industry executives. “We also have quarterly catch-ups with the individual companies to discuss any concerns around performance or any particular determinations they have an issue with.

“We don’t hide from industry feedback; we encourage it. I’ve always invited companies to provide me with opinions from senior counsel that differ from our determinations, but I have to say I’ve yet to be persuaded by any submission that our approaches are incorrect or unfair.”

On the subject of ways to improve consumers’ understanding of what their policies contain and the various measures introduced by regulators – most notably product disclosure statements (PDS) and key facts sheets – Mr Price sighs when Insurance News asks him if he can think of better ways.

“If I knew, I’d have told everybody what to do about it years ago. Plain English is obviously important. But look at it another way: rather than talk about a better form of PDS, we should think about the industry understanding more clearly what people actually want.

“In the 21st Century the PDS and other documents are still rooted in the 1980s and 90s, and it’s time to start looking at what insurance really is.”

He says a bigger issue for the industry at present is affordability. “Insurance premiums are rapidly rising – which is understandable when you consider the catastrophic events we’ve been through recently – and we can only see substantial increases in the immediate future.

“They are likely to take insurance out of being affordable for a large group of people, along with increasing levels of underinsurance or non-insurance.

I think we have to look at and understand what level of insurance is adequate for a 21st Century family, before the disruptors come along and take away that section of the market.

He says personal lines insurance products need to be more flexible and affordable to meet changing patterns of work and living.

“You get to a point where one of the frustrating things is home and contents policies which cover consumers and protect them from defined events but not against accidental damage. “So they wonder, what does my insurance really cover me for?”

He suggests general insurers could consider following the example of the health insurance industry by introducing basic standard wordings for personal lines policies, with three levels of cover from low to gold standard. That would allow for standard provisions that must be included in each level, making it easy to look at, understand and choose.

“The point of difference for an insurer would then be what they add to that standard cover, not what currently applies – where it’s what they subtract from the cover.”

Pointing to such phenomena as bitcoin and new methods of lending that attack the credit card market, he says the insurance industry “needs to adapt – they need to look at what people are really after” – or they’ll find the disruptors moving in.

Mr Price admits the thought of “just walking away into retirement and trimming the roses every day” isn’t how he views the immediate future. He intends to stay on and work two or three days a week at AFCA and help the new ombudsman find his/her feet in a dynamic environment.

“AFCA is being managed in a very progressive and visionary way, and I think it’s going to continue to develop and provide greater service for consumers and the industry,” he says. “I want to assist the new ombudsman – whoever he or she is – and help the executive team at AFCA to achieve their goals.”