Easing the claims pain point The Australian Financial Complaints Authority’s new insurance ombudsman sees communication and clarity as key to better claims experiences By John Deex
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wo of the top five issues raised with the Australian Financial Complaints Authority (AFCA) last financial year – across all financial products – relate to insurance claims. Whether it’s delays, denials or the amounts paid, claims have always dominated consumer concerns about their insurance, and last financial year around 70% of the almost 17,000 general insurance complaints received were about claims. But new Lead Ombudsman Insurance Emma Curtis believes a combination of regulatory change and renewed insurance industry efforts provides hope for the future. Ms Curtis replaced the retiring John Price in August, making the switch from the Australian Securities and Investments Commission (ASIC), where she was Senior Executive Leader, Insurers. “Claims handling is clearly a key pain point for consumers,” she tells Insurance News. “You can understand that because that’s when consumers, who have been paying for a product often for many years, have to actually use it. “Of course, insurers only need to pay out on what they need to under the policy, as long as they’ve acted fairly. But there’s some work that could be done.” Ms Curtis accepts that sometimes customers complain to AFCA when their insurer was correct to deny a claim, but says that even in these cases better communication might have helped ease the consumer’s concern. Customers having a clearer idea of what they’re covered for would help, and “ideally consumers should really spend some time making sure the policy is what they need”.
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But Ms Curtis accepts insureds rarely read the whole product disclosure statement (PDS). “And sometimes when we look at the PDS we find there are internal inconsistencies,” she says. “That doesn’t help because if we can’t work it out, how can we expect a consumer to work out what the cover means in practice? “Insurance is a difficult concept – it’s complicated. Even the most simple insurance is a fairly complex concept about risk management.” Ms Curtis says consumers are vulnerable when they make a claim, even if on the face of it the damage is not major. A minor traffic bingle can still mean the claimant’s car is out of action for a while, and having to deal with an insurer adds to stress levels. So poor communication just exacerbates the problem. “That’s when things can go off the rails. So it can really help to try and manage that relationship and clearly communicate to the consumer, even if the claim isn’t able to be paid.” How does she see that being achieved? “Focusing on that relationship-building, and the trust, the engagement and regular reporting. “Providing dedicated claims staff so there’s a consistent person that the consumer’s talking to at the insurer… can really help to build trust, rather than being passed around to different people all the time. “And then, keeping people up to date with how the claim is progressing so that even if there are expert reports that need to be done, and there are some unavoidable delays, keeping the consumer informed about that can really help.”
Insurers have learned some lessons since concerning claim stories emerged at the Hayne royal commission, Ms Curtis says. Regulatory change that followed the hearings and the commission’s final report could make a huge difference. Design and distribution obligations, which took effect in October this year, shift the onus onto product issuers to provide cover that’s consumer-centric, and suitable for the target market. “I think that’s potentially a game-changer in terms of really shifting the burden away from consumers onto the product issuer to make sure that that products are designed appropriately,” she says. “It addresses some of the issues that have been raised by regulators about disclosure. Disclosure does have limitations, in part because we know customers don’t always read their PDS in full.” Another key reform is making claims handling a financial service. This measure means specialist claims management companies need a financial services licence, and ASIC has greater powers to take action in relation to claims issues. “Previously, the [claims handling] service that insurers had been providing wasn’t regulated,” Ms Curtis says. “It was specifically carved out so that the regulator was limited in what action it could take. “More oversight, and a more consistent approach, and higher standards consistently across the industry should help improve consumer outcomes.” AFCA receives many complaints about claims denied for non-disclosure, and there are regulatory changes happening here, too. The duty of disclosure has been replaced with a duty to take reasonable care not to
