The corporate watchdog has urged consumers who are unhappy with the way their car insurance claim is being handled to lodge a complaint. A review of the sector shows there is a fair bit to complain about.
As a first step, consumers should contact their insurer’s internal dispute resolution team and if they are not satisfied with the outcome, they should go to the Australian Financial Complaints Authority.
The Australian Securities and Investments Commission reviewed the way general insurers investigate comprehensive car insurance claims where fraud is suspected. It found that insurers were putting a significant proportion of consumers through “a harmful and unreasonable process” in dealing with car insurance claims.
ASIC says insurers are not always treating consumers fairly when they investigate claims. The review was based on data from 1.6 million claims over the 12 months to September 2017.
Consumers who had their claim investigated and eventually paid reported poor practices by insurers and their investigators. These included interviews that felt like interrogations, with some investigators suggesting to consumers that they had fabricated their claim.
Consumers also reported that interviews were excessively long and were conducted without notice. There were often repeated requests for information that covered a wide range, including social media histories, birth certificates, criminal record checks, telephone and text message records, bank statements.
There was inadequate support for people with limited English literacy.
ASIC found that investigations targeted mostly valid claims. Only 4 per cent of investigated claims were declined for fraud. Ten per cent were declined for other reasons, 15 per cent were withdrawn and 71 per cent were paid.
ASIC says: “There may be a number of factors driving withdrawn claims. Some could be fraudulent but we are concerned that others could have been legitimate and withdrawn due to the investigation process.”
Of the claims that were withdrawn, 36 per cent were under investigation for more than a year.
Most insurers did not give consumers written information about what they could expect. In ASIC’s view consumers should be informed in writing about the purpose and possible duration of the investigation, the types of documents that may be required and how such requests are relevant.
ASIC says fraud is a serious issue and needs to be investigated but consumers deserve a fair process.
It says: “Consumers can face significant detriment while waiting for their claim to be finalised. Consumers often rely on their insurer to pay their claim so they can replace a stolen or damaged car. Consumers report difficulty in accommodating the needs of their family, attending work and engaging in day-to-day activities while they wait.”
It says it will take action against poor conduct and it says changes to the industry code are necessary. While some improvements to the General Insurance Code of Practise have been proposed, more improvements should be made to raise standards to ensure that claims investigation practices are appropriate and reflect a fair process.