6. Policyholders' experiences with internal and external dispute resolution processes
   1. This chapter considers the experiences of policyholders and insurers with internal dispute resolution (IDR) and external dispute resolution (EDR) processes after the 2022 major floods.

The importance of effective dispute resolution

6.2Dispute resolution processes aim to provide policyholders with an accessible and affordable means of recourse as an alternative to the court system, which is often expensive and time-consuming. For dispute resolution processes to be effective, insurers must ensure that policyholders’ complaints are addressed in a timely, efficient and fair manner.

6.3A policyholder may choose to pursue dispute resolution with their insurer for several reasons. These can include situations where the policyholder and insurer do not agree, for example, on a cash settlement offer where the policyholder believes they are entitled to more under their policy, or that their insurer should not have denied their claim and want the decision reviewed. Disputes may also be initiated due to concerns around the handling of a claim by the insurer, for example when there is a lack of responsiveness to policyholder communications, perceived unfair treatment or lengthy delays.

6.4Common outcomes sought by policyholders making complaints could be apologies or acknowledgements, maintaining or overturning of initial decisions made by the insurer, the awarding of ex-gratia payments, or variations to settlement offers.

6.5Following a natural disaster, having access to timely, efficient and fair dispute resolution processes is an essential part of ensuring policyholders’ experience a fast recovery and the best possible claims process. A poor IDR experience can compound the trauma incurred from the disaster and potentially delay recovery even further, especially if the complaint requires the claims process to halt while the parties wait for a decision to be made.

6.6Legal Aid New South Wales (NSW) provided insight into the experiences of some of their clients with poor IDR processes following the 2022 major floods:

It's deeply frustrating and traumatising for clients to have to fight their insurer, when often what they're looking for from their insurer is support and help, and that's why they've been paying their premiums for so many years. When you come out of an event like the 2022 floods and reach out to your insurer because you think that they'll help you and then face barriers, it's incredibly troubling for those clients.[1]

6.7The Committee received extensive evidence from policyholders, financial counsellors, community sector and private sector lawyers and community advocates on their experiences with IDR and EDR. It was made evident to the Committee that for some policyholders, the IDR and EDR processes were stressful undertakings, sometimes following or in the midst of lengthy and complex claims processes. For some, concerns that IDR or EDR processes may further delay their recovery meant they chose to accept less than satisfactory outcomes, potentially losing out on some of the entitlements under their policy.

6.8The Committee also heard from insurers on the challenges they faced at the time of the 2022 major floods on their IDR teams, including the difficulties of recruiting and training new or reallocated staff in what can be a complex, specialised field.

6.9It was clear to the Committee that the experiences of some policyholders could have been influenced by the level of experience and training provided to staff mobilised to address the increased demand for IDR. It was also noted that learnings from the outcomes of disputes escalated to EDR was not flowing through to IDR teams. The Committee makes recommendations at the end of this chapter for insurers to improve IDR processes more generally, but especially to ensure preparedness in the event of future natural disasters.

Insurer obligations for IDR processes

6.10General insurers are required, as a provision of their Australian Financial Services Licence (AFSL) under the Corporations Act 2001,to have IDR procedures that meet the standards and requirements specified by the Australian Securities and Investments Commission (ASIC). These standards are set out in Regulatory Guide 271 Internal Dispute Resolution (RG 271).[2] Insurers are also required to maintain membership of the Australian Financial Complaints Authority (AFCA).[3]

6.11The General Insurance Code of Practice 2020 (the Code) also contains commitments that signatories to the Code must meet when dealing with a complaint. As part of these regulatory standards, insurers are required to have an IDR process that adopts the definition of a complaint set out in joint Australian and New Zealand Standard

6.12(AS/NZS) 10001:2014:

[An expression] of dissatisfaction made to or about an organization, related to its products, services, staff or the handling of a complaint, where a response or resolution is explicitly or implicitly expected or legally required.[4]

6.13While insurers may structure their IDR process depending on the nature, scale, and complexity of their business, insurers must deal with expressions of dissatisfaction that meet the definition above—including complaints made on the insurer’s social media platforms.[5]

6.14RG 271 contains important timeframe and response requirements for insurers in recognition that timeliness is ‘central to effective complaint management’ and a key performance measure of a financial firm’s IDR process.[6] These requirements cover when insurers should acknowledge a complaint, what must be included in a response, maximum timeframes for the provision of an IDR response, and exceptions to when an insurer does not have to provide a response within the required timeframe.[7]

6.15Insurers are also required to set clear accountabilities for complaints handling functions, including the management of systemic issues that have been identified through policyholder complaints. Insurers must:

1. encourage and enable staff to escalate possible systemic issues they identify from individual complaints;
2. regularly analyse complaint data sets to identify systemic issues;
3. promptly escalate possible systemic issues to appropriate areas within the firm for investigation and action; and
4. report internally on the outcome of investigations, including actions taken, in a timely manner.[8]
   16. ASIC’s expectation is that insurers comply with the IDR standards in RG 271 for the design, implementation, and ongoing improvement of insurers’ IDR processes. The IDR standards reflect the requirements for effective complaint management in AS/NZS 10002:2014, by setting standards for:

• top-level commitment to effective, fair, and timely complaint management;
• enabling complaints;
• resourcing;
• responsiveness;
• objectivity and fairness;
• complaint management policies and procedures;
• data collection, analysis, and internal reporting; and
• continuous improvement of the IDR process.[9]

Disclosure of IDR processes and data

6.17Commencing this year (2024), AFSL firms must report certain IDR activities and data to ASIC to allow for scrutiny and accountability on whether IDR processes are being followed and expectations met. ASIC has the power to publish the IDR data reported, down to the firm level.[10]

6.18The IDR data required to be reported is summarised by ASIC as:

A firm’s IDR data report for a particular reporting period must include specified data in relation to each complaint received by the financial firm that:

• is required to be covered, or is covered, by the firm’s IDR procedure, and was either:

• made in the reporting period, or
• open at any time during the reporting period.

The data provided to ASIC should reflect the status and progress of the complaint as at the closing date of the relevant reporting period.[11]

6.19More specifically, there are sixteen different IDR data categories, with some sub-categories, that firms are required to provide:

Source: ASIC, IDR data reporting handbook, 28 April 2023, p. 12.

6.20Data element 13 extends to identification of the type of insurance the compliant is in regard to.[12]

6.21Data element 14 records the issue raised in the complaint and extends to nearly one hundred different recognised issues types (not all applicable to insurance), such as:

• Quality of advice;
• Premiums;
• Disclosure of information related to the product/service;
• Handling of financial difficulty requests;
• Cancellation of policy or reasons for declining a claim;
• Disputed valuations;
• Delays in claim or complaint handling; and
• Payment issues.[13]
  22. Data element 15 outlines the complaint outcomes, including monetary remedy, but also changes in decision, change in policy, or even withdrawal of the complaint or when a complaint is not resolved and an apology or explanation is the only outcome.[14]
  23. ASIC is expected to release its first report on the data it has received from insurers in Q4 2024.

Insurers’ dispute resolution processes

6.24This section discusses insurers’ dispute resolution processes and areas of dissatisfaction or concern raised with the Committee. The Committee received evidence from consumer groups and impacted policyholders on issues such as a lack of consumer awareness of IDR processes, inconsistency of decisions, delays in the IDR process or the communication of decisions and reported under resourcing of staff in IDR teams.

Insurers’ processes to resolve complaints

6.25Insurers have the flexibility to decide how their IDR teams are set up, how complaints are escalated to IDR and how complaints are resolved (while meeting the RG 271 requirements).

6.26Most insurers reported their IDR processes typically involved a tiered approach, where complaints are initially dealt with by frontline claims staff before progressing through to specialised IDR teams if the complaint cannot be resolved on initial contact. As an example, Insurance Australia Group (IAG) detailed its process as follows:

Customers are first asked to contact us via phone or email to discuss their concerns.

If the complaint can’t be resolved quickly, the complaint can be sent to our Customer Relations team for further consideration and decision.

…

All frontline employees are responsible for capturing and responding to complaints at Level 0, with unresolved complaints escalating to Level 1 which is typically managed by a Lead, Specialist or Senior, and unresolved Level 1 complaints escalating to Level 2 Customer Relations, which is the final stage of the IDR process. This process is outlined in our Product Disclosure Statements (PDS) and the relevant brand’s websites.[15]

6.27Similarly, Youi provided the following diagram to illustrate its complaints handling process.

Source: Youi, Submission 14.3, p. 13.

6.28Major insurers identified that claim delays constituted a large number—if not the majority—of complaints received (where the claim decision was not being contested), including the delayed repairs, long call wait times and unresponsive or slow communication experienced by some policyholders during the claims process.[16] Many of these identified issues were discussed in Chapters 4 and 5.

6.29Data received from major insurers regarding the percentage of major flood related claims that had an associated complaint ranged with large variation between insurers, from 3.43 per cent (IAG) to 31 per cent of claims (Suncorp).[17] This variation generally appeared to stem from the individual insurer’s interpretation of what constituted a complaint and how it was recorded and dealt with. For example, to explain the comparatively high proportion of complaints reported by Suncorp, it noted:

Since 2021 Suncorp has enhanced our complaints management process to ensure that we formally record every expression of dissatisfaction by a customer as a complaint and manage it accordingly. The threshold for recording a customer complaint is low, for example if a customer expressed dissatisfaction that they were on hold waiting for their call to be answered longer than they expected, this would be logged as a complaint.

With this standard in place, across the four 2022 flood events, Suncorp recorded 28,503 expressions of dissatisfaction.A complaint was logged on 31% of home claims lodged from the 2022 flood events.

Of these IDR cases, 2,652 (6.7% of home claims lodged) escalated to our Internal Customer Relations (ICR) team.The balance of the IDR cases were resolved by our Home Claims team early in the complaints process.[18]

6.30The was a similarly wide variation in the average number of days major insurers took to resolve a complaint, ranging from 5.73 days to 31.77 days.[19] Different interpretations of what is recorded as a complaint meant that it was challenging to determine from the data the extent to which other factors influenced timeframes to resolve a complaint, for example, the number of complex cases under management and staffing levels.

6.31It is plausible that where two insurers have different thresholds for what constitutes IDR, one insurer may have a higher average number of days to resolve disputes simply because their cases are, on average, more complex than the other insurer – not because their systems are less effective. More consistent measurement of what constitutes a dispute would make it easier to compare the resolution performance across insurers.

6.32As an overall indicator of complaints and IDR processes related to the major floods, data provided on request by the Committee from the Insurance Council of Australia (ICA) indicated that, across all personal and commercial policy class claims from their members, 32,427 out of a total of 305,769 claims included a complaint that was escalated to IDR—approximately 10.6 per cent of associated claims. Additionally, the same data identified that 2,654 claims progressed to an EDR process (0.87 per cent).[20]

6.33Major insurers were requested by the Committee to provide data relating to IDR complaint handling and decisions. Data requested included (but was not limited to) total number of complaints handled, instances where the insurers’ decision was upheld, resolution rates in full or partial favour of the policyholder and the number of unresolved cases at IDR. This data is available in detail on the Committee’s website, but elements are summarised below.[21]

Table 6.2Internal dispute resolution data from major insurers (in order of submissions received)

Source: Suncorp Group, Supplementary Submission 12.2; Allianz Australia, Supplementary Submission 13.3; Youi, Supplementary Submission 14.3; RACQ Group, Supplementary Submission 15.2; Insurance Australia Group, Supplementary Submission 16.4; QBE Insurance Group, Supplementary Submission 17.4; Auto & General Holdings, Supplementary Submission 18.3; Hollard Holdings Australia, Supplementary Submission 19.2.

6.34The caveats provided, and the inconsistency in reporting on the data collected or categorised, as identified in some cases above, limited the usefulness of the data for direct comparison, but gave an overall indication of the quantum of complaints or IDR processes commenced and resolved related to major floods claims. The Committee is conscious that these inconsistencies must be taken into account when analysing this data with an eye to assessing insurer performance, or attempting to compare whether one insurer fielded more complaints, or handled IDR processes more efficiently. The inconsistency in the data provided and even the way in which individual insurers identify a complaint, or its resolution, render any such comparative analysis unhelpful or even misleading, so therefore this table (and all tables in this chapter) should not be taken as an indication of any assessment of insurer performance by the Committee.

6.35The inconsistency of reporting and the caveats identified above, are commented on later in this chapter.

Concerns raised about insurers’ dispute resolution processes

6.36The data provided by insurers discussed above generally painted a picture of satisfactory resolution for the majority of complaints. However, throughout the inquiry, the Committee was provided with evidence that the journey of many policyholders through the complaints process was not to the standard expected. A joint submission by Financial Rights Legal Centre, CHOICE, Consumer Action Law Centre and Westjustice indicated that for many policyholders the IDR experience was below people’s expectations.[22]

6.37Legal Aid Queensland outlined its experience with insurers’ IDR processes, including inadequate weight being given to the policyholders’ direct experience of the flood; a heavy reliance on inadequate expert reports; as well as a lack of guidance to policyholders on information needed for a proper claim review. It alleged the consequences of these issues resulted in a greater number of claims progressing to AFCA that should have been resolved at the IDR level, and in consumers no longer trusting the insurers’ IDR processes.[23]

6.38Financial Counselling Australia observed privacy breaches throughout the IDR process—such as poor handling of sensitive information, including for claims where domestic violence was known. Issues relating to privacy breaches were noted as negatively affecting policyholders’ trust in their insurer.[24]

6.39The General Insurance Code Governance Committee (CGC) published an inquiry report Making Better Claims Decisions in July 2023 that examined the claims practices of six insurers. The CGC found that in 2021-22, a quarter of denied home claims proceeded through to the IDR functions of the insurers examined. Notably, nearly half of the 11,000 complaints were later overturned in favour of the policyholder, which it considered a ‘significant overturn rate’ that raised questions about the quality of decision-making by insurers and the decisions made in the claims-handling process (discussed in Chapter 4).[25]

6.40Under RG 271, insurers are required to inform policyholders who have made a complaint of the outcome of the complaint within 30 calendar days.[26] Evidence provided by insurers, which has been recreated in Table 6.3, shows a high proportion of complaints were reported as resolved within 30 days.

Source: Suncorp Group, Submission 12; Allianz Australia, Submission 13; Youi, Submission 14; RACQ Group, Submission 15; Insurance Australia Group, Submission 16 (1); QBE Insurance Group, Supplementary Submission 17.1; Auto & General Holdings, Supplementary Submission 18.1; Hollard Holdings, Submission 19.

Consumer awareness of insurers' IDR processes

6.41The Code states that insurers will make information about the right to make a complaint, the internal processes for dealing with complaints, and access to EDR readily available to policyholders. This information is to be published on its website, other digital platforms and in relevant written communications.[27]

6.42However, despite this information being available, evidence to the Committee highlighted the potential power imbalance between a policyholder and the insurer during the IDR process regarding the awareness of the processes available, and what is required for a complaint to be considered.

6.43ASIC expressed concern that there are many policyholders who ‘don’t show up in the data’ around complaints handling since they are unaware of their right to make a complaint or have not known how to put it forward for serious consideration.[28] The Consumer Action Law Centre similarly told the Committee that ‘people don’t know that they can challenge the decision, or if they do, they don’t know how to go about it’ when speaking about claim denials based on wear and tear and lack of maintenance exclusions.[29]

6.44The reasons for not making a complaint vary, and it is difficult to determine how many policyholders might have been successful at overturning their insurers’ decision, but who did not pursue IDR. This was a concern put forward by ARC Justice in its submission, having experience with policyholders who were reluctant to make a complaint or challenge a decision made by their insurer:

Whilst some people simply don’t know they can challenge a decision, others are reluctant to, fearing consequences including slowing the settlement process down, having an offer withdrawn or ‘getting on the insurer’s bad side’.[30]

6.45The intervention and assistance of financial counsellors and legal assistance can help to address the power imbalance between policyholders and their insurer in the IDR process. The expertise of legal professionals and financial counsellors has been invaluable to policyholders in effectively articulating their case, reducing stress, ensuring that their rights are protected, as well as providing experience in negotiating with insurance companies and potentially obtain more favourable outcomes.

6.46However, individuals should not have to pursue assistance or representation to obtain a fair, timely and effective outcome from their insurer in IDR. This concern was raised by the Consumer Action Law Centre, which stated that a policyholder should be able to make the complaint themselves and ‘get the same treatment they would get if they were represented’.[31] Other submitters highlighted that many policyholders found it difficult to navigate the complaints process without assistance, given the trauma experienced.[32]

6.47The Australian Consumers Insurance Lobby argued that there is large power imbalance between policyholders and insurers due to the nature of the IDR process, particularly when an individual is self-represented:

…when you're a consumer and dealing with your first-ever dispute, you don't even know how the dispute process works or how to write a dispute, and you're dealing with an insurer that deals with this day on day and is very experienced in handling disputes, I do feel that there is a level of power imbalance here between consumers and insurers. And you see in the processes with internal dispute resolution and the complaints process through AFCA, often the consumer is self-represented in these instances, where an insurer is represented by employees who are very sophisticated and know exactly the arguments to run.[33]

Consistency of insurers’ treatment of complaints

6.48Consistency in an insurers’ IDR process is crucial for both policyholders and the industry. For policyholders, it ensures fair treatment, enhancing confidence and trust in the insurer. For the industry, it enhances overall trust and industry reputation and the promotion of good business practices.

6.49However, the experience of policyholders after the major floods, as discussed by various advocacy, financial assistance, and legal aid groups, raised a lack of consistency in IDR decision-making to the Committee as an issue. These inconsistencies ranged from how complaints were recognised by the insurer, to how they were escalated and managed.

6.50Legal Aid NSW detailed its experience with inconsistencies in IDR to the Committee, noting that there have been instances where a client may have already attempted IDR themselves, with a different result obtained when attempted again with assistance. Legal Aid NSW further commented that:

For some insurers, it seems to be a tick-box exercise: they've done this part, and now the client or the policyholder can go on and decide what they want to do from there. Some insurers are very engaged with the process and will make every attempt to discuss the concerns with the policyholder. So it's not all bad, but we obviously see the worst of it all. It differs from one insurer to the other.[34]

6.51This was similar to the Consumer Action Law Centre’s experience, based on reports from financial counsellors, viewing there to be a lack of consistency in decision-making within insurers and when compared across providers. The Consumer Action Law Centre additionally highlighted that policyholders often encounter ‘even more challenges and stress’ in the complaints process, in comparison to the claims handling process.[35] Even when there were positive experiences in IDR, it was not necessarily indicative of the quality of processes, training and systems.[36]

6.52As mentioned earlier in this chapter, in accordance with RG 271, insurers are required to deal with expressions of dissatisfaction that meet the required definition through an IDR process.[37] Despite this, the Committee received evidence of a lack of consistency in escalating disputes to IDR. Disaster Legal Help Victoria observed many policyholders who have been in protracted claims disputes with their insurer where the insurer had failed to escalate the complaint. Additionally, Disaster Legal Help Victoria identified that it continued to be contacted by policyholders who were still navigating a claim dispute but have not been escalated to IDR.[38]

6.53This inconsistency in identifying and escalating a complaint can create confusion and add further delays to an already lengthy process for policyholders. ARC Justice, which has assisted in lodging complaints through the required channels, explained to the Committee:

So they will think that they've made a complaint by talking to the person that is handling their claim. But actually to make that complaint properly in order to trigger those systems, they have to go through a particular address. One of the things that we do in our work is to help people write those letters and get them to the right address so that they have lodged that complaint and they've started that clock. Others have conversations where the person will say, 'So that's okay; you're all good now' and they think their complaint is still on foot, but that's enough for the insurer to say, 'We've dealt with that and it's over.' And then the time has to start again.[39]

6.54The inconsistent training and experience of IDR assessors was raised to the Committee as an important issue by Legal Aid New South Wales, stating that in its experience, many IDR decision letters lacked a proper explanation of exclusions relied on to deny or partially deny a complaint. When IDR staff were asked to explain how the insurer had determined an exclusion was applicable and could be relied on to deny the claim, often staff lacked the information or necessary understanding to convey this information to the policyholder.[40]

6.55The issue of standardisation of exclusions was discussed in Chapter 4.

Underinvestment in IDR staff

6.56Stakeholders raised concerns about insurers’ resourcing of their IDR teams. AFCA pointed to the peak 21 per cent non-response rate for the insurance sector through 2022 as evidence of ‘major resourcing issues’ in the complaint-handling process for insurers.[41] In its submission, AFCA recommended ‘immediate and enduring increases’ to the resourcing of claims and complaints teams to address these issues.[42] From AFCA’s perspective, the increased volume of complaints that should have been resolved at IDR level and the non-response rate indicates to the Committee that both insurers’ claims, and IDR systems are being underinvested in.

6.57One suggestion made by submitters was to bring forward earlier involvement of more senior or experienced staff in the IDR process as this may lead to quicker resolutions, more confidence in junior staff when handling complex issues and fairer decisions for policyholders.[43] For example, Disaster Legal Help Victoria recommended that insurers implement a protocol that necessitates the escalation of a claim to senior IDR staff if four months have elapsed since a claim was lodged and a dispute remains.[44]

6.58Stakeholders also suggested improving the training and resourcing of IDR staff particularly with reference to the critical analysis of expert reports;[45] proactive management and detection of expressions of dissatisfaction;[46] and training around the Code on key areas such as timeframes.[47]

Complaints made to AFCA – External Dispute Resolution

AFCA’s complaints handling processes

6.59Policyholders can initiate a complaint with AFCA after first having lodged a complaint with their insurer. The IDR process does not have to be complete for a policyholder to go to AFCA, as AFCA will initially refer the complaint back to the insurer to either complete the IDR process or work directly with the policyholder to reach a resolution before progressing.

6.60The response from insurers to the registration and referral process to AFCA is required within a certain timeframe—either to confirm that the complaint has been resolved, provide a final IDR response, or request a review of the Rules if it is believed that the complaint is outside of AFCA’s jurisdiction.[48] If an insurer fails to reply by the stipulated deadline, or if the reply is inadequate, it is deemed as a ‘non-response at registration’. This is documented and made public as part of AFCA’s data disclosure.

6.61Depending on the outcome from the registration and referral back to the insurer—AFCA will decide whether to close or progress the complaint through to Case Management. Not all complaints progress through each stage, as the initial registration and referral stage provides an opportunity for insurers to resolve the complaint without further AFCA involvement.[49]

6.62AFCA is required to take relevant industry codes into consideration when determining what would be a fair outcome for the policyholder, including the General Insurance Code of Practice (the Code). The Code ‘plays a vital role in ensuring good outcomes’ for policyholders and is ‘relied on directly’ by AFCA in making decisions.[50] One issue with AFCA’s resolution of disputes by agreement is that it is unclear what proportion of such cases are resolved in favour of the consumer or the insurer.

6.63As highlighted by AFCA in its submission, the ‘vast majority’ of complaints submitted to AFCA are resolved by agreement, whether through the initial referral process or through negotiation, conciliation or a preliminary assessment provided to the insurer and the policyholder.[51]

6.64If agreement cannot be reached through the case management progress, then a binding decision is made in the form of a Determination. A small percentage of complaints made to AFCA reach this stage. In 2022-23, only five per cent of all complaints needed to progress to a final Determination. If the insurer does not comply with a Determination and the remedies specified, AFCA must report this to ASIC.[52]

6.65There are a range of remedies that can be awarded to as part of an AFCA determination, including payments for financial or non-financial loss.[53] The monetary compensation for loss that AFCA can award per claim relating to insurance is capped in relation to the type of loss—direct, indirect, or non-financial.[54] As set out in AFCA’s Rules, as of July 2024, the limits applying to insurance companies submitted to AFCA are $6,300 per claim for both indirect financial loss and non-financial loss, and $631,500 per claim for direct financial loss (where the amount claimed by the Complainant must not exceed $1,263,000).[55]

6.66As outlined in its submission to the inquiry, AFCA has applied non-financial loss remedies in appropriate cases involving the floods and generally ‘takes a conservative approach’.[56]

6.67In evidence to the Committee, AFCA provided examples of non-financial remedies:

We might make an award where we require the insurer to do a scope of works and an actionable quote and to get the complainant to contribute to deciding on a builder to do the scope of works and the quote, and we make awards around temporary accommodation and variously how the claim is going to be resolved by the insurer. So there might be a number of steps that need to be undertaken as a result of the decision that we issue.[57]

6.68In the situation where an insurer has denied a policyholder’s insurance policy claim, AFCA will apply the terms of the contract when deciding the amount to be paid in response. As outlined in its Operational Guidelines, there may be cases where AFCA considers the insurer’s response to the claim as so unreasonable that it should compensate the complainant for loss incurred due to a delay in payment of the claim—even if the contract does not provide for it.[58] An additional example of this could be an incorrect denial of a claim where the complainant has incurred costs to obtain an expert opinion, such as hydrology reports—which can be considered direct financial losses.[59]

Complaints to AFCA relating to 2022 major flood claims

6.69The volume of complaints only relating to the 2022 major floods that were progressed through to AFCA represented a small proportion of the overall claims made by impacted policyholders. More broadly, it is important to recognise that AFCA has experienced a 50 per cent rise in complaints against general insurance in the 2022-23 financial year—the highest number it has seen for general insurance in the history of external dispute resolution at AFCA.[60]

6.70The sharp rise in disputes not relating to the major floods may have reflected the fact that at least some insurers diverted internal resources away from business as usual towards dealing with the spike of cases resulting from the floods. This highlights the fact that natural disasters can have major consequences for claims handling and dispute resolution beyond the claims directly arising the natural disaster itself.

6.71As of September 2023 (the date of its primary submission to the inquiry), AFCA had received 3,477 complaints related to the major floods. Table 6.4 shows the breakdown of claims by major flood event. Complaints relating to home building insurance products represented 77 per cent, with home contents products representing a further 9 per cent of the total complaints.[61]

Source: AFCA, Submission 1, p. 10; data provided by the ICA.

6.72The top five issues raised to AFCA in major flood related complaints were:

• Delays in claims handling – 36 per cent;
• Denial of a claim (exclusion/condition) – 32 per cent;
• Claim amount – 28 per cent;
• Denial of a claim – 10 per cent; and
• Service quality – 5 per cent.[62]
  73. AFCA expressed concern to the Committee regarding the number of complaints progressing from IDR to it as an EDR process. The impact on individuals, particularly those who have experienced a natural disaster, is significant:

…and they are having to, first of all, relive that through the claim, then they're reliving it through the internal dispute resolution process and now they're having to relive it a third time through AFCA. So you can imagine that, by the time they get to that point, we're seeing issues around mental health and high levels of general anxiety and concern as well.[63]

6.74The most common issue AFCA observed—and is ‘particularly concerned’ about—are delay related complaints.[64] In its submission, AFCA observed that many consumers lose patience and confidence that their insurer will, or can respond to their complaint efficiently, effectively, and fairly after ‘languishing in a claims handling process for an extended period’.[65]

6.75In the context of natural disasters, some delays are out of the insurers’ control, such as a shortage of available tradespeople. However, AFCA’s evidence to the Committee identified that the problem was not necessarily the delay itself, but the ‘void of information’ and lack of communication between the insurer and the policyholder regarding the delays.[66]

6.76Additional issues relating to delays included claims staff not being easily contactable, policyholders having to engage with multiple staff, and general uncertainty regarding progress and wait times. AFCA viewed this additional distress for individuals caused by delays as being more resolvable than other complaints, with effective communication and engagement with the policyholder going ‘a long way’ in resolving these complaints.[67]

6.77Evidence provided to the Committee from AFCA regarding the stages of the EDR process at which cases were closed highlights that most major flood related complaints were dealt with at the Case Management level. The rate at which cases closed at Case Management or later (65 per cent) was comparatively high compared to all general insurance complaints made in the same period (46 per cent).[68] In AFCA’s view, this highlights the need for increased resources to deal with complaints:

That shouldn’t be coming to AFCA. It really shouldn’t. AFCA should be a last resort. We should be here to deal with the really tricky, complex and ugly disputes that can’t be resolved between the insurer and the consumer. We should not be here to try an adjudicate on a delay.[69]

6.78Responding to the suggestion that insurers are ‘outsourcing’ their IDR responsibilities to AFCA, AFCA agreed that many, if not most, of the complaints that are lodged with AFCA should be resolved by insurers directly at IDR.[70] Table 6.5 below outlines AFCA’s data (as of September 2023) regarding the stages in which major flood complaint cases closed in comparison to general insurance complaints for the same period.

Source: AFCA, Submission 1, p. 14.*The last column provides figures for all general insurance complaints received by AFCA from 1/2/22 to 30/9/2023 to allow comparison with figures from the major floods.

6.79AFCA does not have full visibility of outcomes at earlier stages of the EDR process. Table 6.6 details the outcomes of AFCA’s major flood related complaints at the time of its primary submission, noting that out of the 585 complaints resolved at the Preliminary Assessment or Decision in favour of one party, 38 per cent were resolved in favour of the policyholder.[71]

Source: AFCA, Submission 1, pp. 15-16.*The last column provides figures for all general insurance complaints received by AFCA from 1/2/22 to 30/9/2023 to allow comparison with figures from the major floods.

6.80Supplementing the data provided by AFCA, insurers were requested by the Committee to provide information relating to decisions referred through to AFCA, including the number of cases where the insurers’ decision and handling were fully or partially upheld, overturn rates in full favour of the policyholder, early resolution rates and the number of unresolved cases at AFCA by major flood event.[72]

Source: Suncorp Group, Supplementary Submission 12.2; Allianz Australia, Supplementary Submission 13.3; Youi, Supplementary Submission 14.3; RACQ Group, Supplementary Submission 15.2; Insurance Australia Group, Supplementary Submission 16.4; QBE Insurance Group, Supplementary Submission 17.4; Auto & General Holdings, Supplementary Submission 18.3; Hollard Holdings Australia, Supplementary Submission 19.2.

6.81As identified in previous data representations in this chapter, the variation in results and caveats provided on data (as outlined in the submissions) hampers direct comparison of the data, but does provide an overall indicator of EDR numbers and outcomes.

6.82Denials of claims based on expert reports, such as hydrology reports, was presented by AFCA as an issue that required more work to raise standards and quality. AFCA’s experience, as outlined in their submission, is that the expert reports relied on by insurers vary in quality—and in some cases may be deficient. There was also a lack of clarification on what the role of an expert is versus the role of the insurer in decision-making.[73] AFCA was supportive of any changes to the standards and quality around expert reports, viewing any improvements as a potential to reduce the number of complaints that go through to AFCA as well as improve insurers’ claims handling decisions.[74] Any such improvements would presumably also deliver better outcomes for initial claims processes, as discussed in Chapter 4.

6.83In some instances, hydrology reports had been used to deny claims without appropriate due diligence being taken. In AFCA’s view, it did not consider the role of experts in producing such reports to be that of decision making or to provide recommendations regarding the interpretation and application of policy provisions.[75]

6.84The Committee inquired into whether greater access to expert reports for those navigating dispute resolution processes would enable consumers to have a more level playing field.

6.85While AFCA agreed that there is some value in policyholders having access to expert reports in order to challenge that of their insurers’, in relation to the EDR process, there ‘isn’t a requirement’ for a policyholder to obtain an additional expert report to be successful, yet viewed there being value overall in policyholders having greater access.[76] AFCA elaborated to the Committee that it’s complaint resolution process involved other sources of information to make a decision and has found cases in favour of the policyholder despite an expert report being provided.[77]

6.86In relation to improvements to IDR processes, AFCA viewed addressing issues of complaints, delays and poor communication as ‘low-hanging fruit’ that insurers needed to address. Further, AFCA believe that insurers need to increase resourcing of their dispute resolution teams, as well as claims handling.[78] However, it was acknowledged that even when insurers’ resources are increased, there is still a delay in full competency of staff.[79]

6.87AFCA, concerned about insurers’ ongoing capacity to resolve complaints in a timely, efficient, and effective manner, believed that there is an ongoing need for insurers to allocate more resources to complaints and claims teams, prioritise staff training and capabilities, streamline processes using technology, empower staff to settle complaints, and foster a resolution and consumer-centric culture.[80]

6.88As an extension of this, some witnesses identified that delays in AFCA processes might be due to a lack of resourcing. Anglicare Victoria commented that AFCA processes were ‘…fairly user friendly for a lot of people. It's the time frames because of the backlog, especially after a big event—waiting to progress through to the next stage. That's the problem. It would be very helpful if they were better resourced’.[81]

Policyholders and insurers’ experiences of AFCA’s processes

6.89Evidence provided to the Committee, from financial counsellors, legal aid groups and individuals with personal experience, regarding interactions with the EDR process were generally positive and supportive of AFCA’s role. However, issues such as the long-time frames to achieve dispute resolution and the potential imbalance of power when expert reports are involved in the process were raised as an area for potential improvement.

6.90A common experience highlighted to the Committee was the pressure AFCA places on insurers to act on ongoing disputes. For example, the Committee received evidence that insurers were more likely to engage with policyholders to resolve the dispute when AFCA was involved, even after previous lengthy delays and ineffective communication between the policyholder and their insurer. This was noted by Caxton Legal Centre, which had observed that insurers made a ‘greater effort to reconsider the matter’ and work with the client to resolve the claim when EDR was pursued.[82]

6.91This was also emphasised by the Australian Consumers Insurance Lobby, which stated that once a complaint reached the EDR process, insurers were faced with ‘increased pressure to make the correct decisions’, in contrast to IDR processes where there were fewer consequences for errors.[83]

6.92AFCA is also considered as a ‘extraordinarily valuable’ institution that offered policyholders a free, step-by-step resolution process.[84] Legal Aid New South Wales was supportive of AFCA’s role in EDR, explaining to the Committee that:

There are a few comparable consumer ombudsmen. The fact that consumers can complain, that it's free, that it's a staged dispute resolution process and that it's a decision that's ultimately binding on the insurer gives incredible access to justice. It allows access to justice in a way that customers simply wouldn't have if they were relying on the court process. So we're very supportive of AFCA.[85]

6.93Long timeframes in EDR can have significant impacts on policyholders, as EDR is often pursued after the initial claims process and IDR process with their insurer. The trauma, financial impact, uncertainty, and displacement experienced by policyholders was conveyed to the Committee through evidence provided from a range of groups that provided support.

6.94Disaster Legal Help Victoria stated that the decision to pursue recourse through the AFCA process was a ‘huge decision’ to make considering the unknown timeframes for resolution:

What that means is that people go through all of those processes of the internal dispute resolution with the insurance company, and then, if that is not successful, it goes on to AFCA. It may be six months before AFCA is able to resolve that matter or decide that matter because of the sheer number of matters that are before it.

So, realistically, a consumer is saying to themselves, 'Okay, is it six months, is it a year, before my matter will actually be resolved?' They are often out of home and they may be in temporary accommodation, and that could be not convenient to school or work. It could place additional burdens on family members as well…[86]

6.95As policyholders must engage the IDR process with their insurer prior to engaging with AFCA, the unknown length of time to reach a resolution may lead to individuals deciding to accept decisions they may otherwise not have. Quicker dispute resolution and additional resourcing capacity for surge periods could potentially lead to more policyholders taking up the EDR scheme more frequently. The impact of this was raised by ARC Justice, which stated that:

If I were to go to AFCA today, I might get a decision possibly six months down the road by the time we wait to get to the front of the queue and then for that process to work its way through. That's six months in a caravan. At some point, you have to cut your loss, and that's a decision people are making.[87]

6.96In Legal Aid NSW’s experience, often the policyholders’ matter will resolve ‘fairly quickly’ despite lengthy negotiations at the IDR level. Informed by advice from AFCA, Legal Aid NSW told the Committee that many of the disputes it lodged end up being resolved at the registration stage. Legal Aid NSW viewed this as being ‘enormously disheartening’ that it takes until EDR registration to get a referral.[88]

6.97The Committee also examined with various witnesses the potential power imbalance during the EDR process where individuals did or did not have access to expert reports, such as hydrology reports. The ability for individuals to access reports—where hydrologists, for example, are either unavailable, unaffordable, or unwilling to provide reports in high-demand periods was discussed. (the issue of expert reports is discussed further in Chapter 4).

6.98The Committee explored with witnesses whether greater access to expert reports for individuals going through the EDR process would be beneficial and allow those who would not otherwise have access to them, a better chance at a successful EDR outcome. The Committee notes that current clauses 81 and 82 of the Code require insurers to provide information they relied on to deny a claim or not pay in full, however greater access to reports for any dispute process is desirable.

6.99The Financial Rights Legal Centre, CHOICE, the Consumer Action Law Centre and Westjustice recommended in a joint submission that insurers should pool funds to allow consumers to obtain independent reports in a timely manner when they have complaints with AFCA.[89]

6.100In further discussions with the Committee, the Consumer Action Law Centre explained that there had been many instances where issues have been identified with insurers’ expert reports, meaning that policyholders were able to challenge the decision without obtaining their own expert reports. It was also acknowledged that AFCA often determines that the insurer should reimburse a policyholder who has obtained their own report, however this is not viable for those who cannot afford to initially do so.[90]

6.101The quality and variability of expert reports was also raised to the Committee as a serious issue. In Legal Aid NSW’s experience, many of the AFCA outcomes it had seen saw overturning of decisions where insurers have relied on hydrologists reports that did not take into account first-hand experiences. Further,

There are disputes around the quality of the reports that insurers are relying on in making their decisions. There are issues for our clients, especially with hydrology reports. There is a very small number of hydrologists available in Australia, and many of those hydrologists are used by insurers, so they're not necessarily going to be available for your everyday consumer. Even if they were available, the cost to have a hydrologist do a report for you is just very, very out of reach for many of our clients. So those types of matters, if they haven't already gone through AFCA, are currently in AFCA.[91]

6.102ARC Justice viewed that access to an expert to assist in the EDR process was a challenge for individuals:

You need to effectively have gone through the process of paying for them. If all goes well, you might get the money back from AFCA, or at least some of it. But in most instances you have to know that you need the expert, find the right expert and then have an expert that is willing to go through that process of going to AFCA for you. And one of the challenges that people we work with face is that the vast majority of experts are conflicted. So even though they might be happy to take your money and provide you a report, they won't necessarily stand up at AFCA and speak to it, because that might jeopardise work that they are already doing or want to do for insurance companies. So independence is a key problem in addition to the expense.[92]

6.103In comparison to the length of delays experienced by individuals in the dispute process, the amount of compensation AFCA can award for non‑financial loss was perceived to be inadequate.

6.104As highlighted by Legal Aid NSW in their submission, the then cap of $5,400 for non-financial loss available to compensate for unreasonable delay is inadequate when considering the ‘substantial inconvenience, pain and distress’ experienced, and therefore argued that the jurisdictional limit should be increased. Further, the compensation available did not appear to sufficiently disincentivise insurers from breaching the claim handling timeframes in the General Insurance Code of Practice (the Code).[93]

6.105The Northern Rivers Community Legal Centre commented that combined with the overall length of the process, the level of non-financial compensation that is availablethen becomes difficult to recommend to impacted policyholders to go through the AFCA process.[94]

6.106In response to these concerns, evidence from AFCA on non-financial loss amounts put forward the view that while AFCA is open to reviews of the award amount, AFCA is ‘not a court’ and its purpose is not to administer pecuniary penalties.[95] Further, citing the Treasury review of AFCA in 2021, it was determined that there was no evidence to support the existing monetary cap as inadequate and ultimately did not support an increase.[96]

6.107The Committee also received evidence from individuals in affected communities that determinations from AFCA may not be being enforced. Mr Ken Olsson outlined experiencing difficulties with his insurance claim with NRMA and complaints processes:

We filed a complaint with ASIC under misconduct. We filed a complaint with the Insurance Council of Australia for breach of conduct. We filed a complaint with AFCA, of course, and we were given a determination in September last year, which AFCA failed to abide under the rules to enforce. We then had the lead ombudsman, Emma, say that she could not enforce the orders.[97]

6.108Some survey respondents also identified some issues with AFCA processes, however the majority did outline that AFCA becoming involved aided in complaints being progressed:

AFCA ombudsman process was good but the initial process was poor. First person consistently missed deadlines she had set herself. Person who replaced her discovered multiple examples of communications not forwarded, etc, and then found in favour of the insurer. The ombudsman found in my favour. This is for two claims dating from a flood in early 2021 and again in 2022. AFCA made their final determination only a week ago.

…

AFCA said they have never had a company come back trying to get out of the ruling twice. AFCA need more powers and more well trained staff, treated well so they stay. The payment for non-financial loss needs to be raised as it is no threat to the insurance companies. House prices and costs of repairs have risen. AFCA need more powers to rule, particularly if insured companies have delayed and caused more damage but their inaction. They need to be able to rule over the sum insured if the insurance company caused the damage.

…

Until AFCA became involved our insurers repeatedly ignored our complaints and refused parts of claim previously accepted leaving us with mouldy wet house still certified as uninhabitable today.

…

The only reason my insurer pulled their finger out and is repairing the property is because I lodged a complaint with AFCA.[98]

6.109Ms Aveley McCann gave evidence to the Committee in Lismore NSW regarding her claim delays and dispute resolution process:

After a year of back and forth, with the help of the Australian Financial Complaints Authority, AFCA, we reached a resolution in March 2023. But then silence. Five weeks of countless unanswered follow-ups later, I had to reopen my case with AFCA, and it wasn't until December 2023 that my house was finally restumped.[99]

6.110Illustrating the frustration that many experience, the impact on claimants’ wellbeing, as well as inconsistency in understanding of when EDR processes can be commenced, Ms Kate Olivieri, outlined the following to the Committee:

Everyone says, 'Go to AFCA,' but you must pursue the complaints process with your insurer to its end before you can even apply, and AFCA is overwhelmed. Insurance companies need incentives to deal more quickly and reasonably with more disputes themselves.

We were able to get a resolution with AFCA 18 months on, but the resolution did not put our house back. No one will pay us for the time spent, our mental health lost or the loss of value in our house.[100]

6.111However, not all evidence was that EDR processes through AFCA were unfruitful:

We ended up going to AFCA. AFCA were very good all the way through. They were wonderful. Within probably six weeks from the time we took it to AFCA until the insurance company were told they had to pay for the bore and the hard surface clean on the outside, those two things had to be paid for in full immediately and we had so many weeks in order for the rest of the claim to be processed. We did get the money to do the bore and the concrete clean, but nothing else.[101]

6.112Some insurers advocated for by AFCA to provide more flexibility to insurers to meet the timeframes to respond with information that has been requested by AFCA. For a standard complaint that progresses through to AFCA case management, information from the insurer is to be provided within 7-21 days.[102]

6.113In RACQ’s view, AFCA is ‘reluctant’ to provide extensions and does not provide guidelines in which an extension would be granted. This may impede the ability of an insurer to maintain an ongoing relationship with the policyholder. Further, RACQ viewed the timeframes imposed by AFCA as not allowing the insurer to provide responses with enough detail.[103]

6.114IAG recommended greater timeframe flexibility, specifically during the registration and referral period and case management to allow parties to focus on resolution.[104] Another recommendation put forward by QBE is the potential consideration of whether the timeframes for responses could be extended during catastrophe events, when numbers of complaints rise.[105]

6.115While the Committee recognises that these suggestions from insurers are intended to allow for insurers to meet dispute resolution requirements in a timely manner, the Committee does not support any change to the current 7-21 day timeframe, identifying that with dedicated and well-resourced dispute resolution teams recommended in this report, those current timeframes should be able to be met.

6.116Finally, the Committee notes the evidence from submitters and witnesses that the current caps on non-financial loss compensation amounts is somewhat limiting on the effect that those payments can make to an affected complainant.

6.117However, as detailed earlier in this chapter, the 2021 review of AFCA did not determine that an increase to these amounts was warranted, identifying that it was a means for AFCA to quickly compensate complainants for physical inconvenience or stress, not as a means to replace appropriate claims settlement. The Committee agrees with this finding and notes that the amount was recently increased in January 2024.

Potential improvements to the EDR process

6.118The Committee received evidence from insurers in relation to potential improvements to EDR. This evidence highlighted two potential recommendations—a formalised avenue to expedite complex or vulnerable disputes, and greater flexibility on timeframes for information directed by AFCA.

6.119AFCA’s ‘Fast Track’ case management process is available to complaints that are low value and single issue and are within the AFCA Rules. The Fast Track process is separate to situations involving financial difficulty. Extra information is to be provided within 7 days.[106] However, this expedited timeframe option is not available for more complex cases, or where a dispute involves a vulnerable client.

6.120A recommendation to improve IDR put forward by insurers is for there to be more formalised opportunities to expedite complex or vulnerable disputes for immediate decision by AFCA. This would aim to improve turnaround times for decisions at EDR and improve processes, especially in cases where a timely decision would deliver more certainty to the complainant.

6.121This was highlighted by Hollard, which stated that the current AFCA complaint process is extended by a period of around two months where the policyholder is vulnerable, or the claim is significant or complex.[107]

6.122Greater opportunities to expedite matters to faster decision making would improve turnaround times for policyholders. Youi observed that increased opportunities to expedite matters to allow for faster decision-making at AFCA would be an improvement.[108]

Committee comment

6.123IDR and EDR processes were highlighted as problematic throughout the evidence provided to the Committee. This related to both the quality of the decision-making and the delays in arriving at decisions. Policyholders often felt dissatisfied with the expert reports that were relied upon to deny claims. Compounding these issues is the lack of transparency in relation to both IDR and EDR and the inconsistent data that is currently being produced across insurers. The IDR data across insurers appears to be highly inconsistent in terms of what constitutes an ‘internal dispute’, with rates of IDR varying considerably (see Table 6.2). Even though ASIC has issued RG 271, it is not clear that this has resulted in consistent reporting of IDR prevalence and handling.

6.124Moreover, in addition to being too frequent, the outcomes of EDR disputes are not sufficiently transparent. The ratio of claims decided by AFCA in favour of the insurer or the claimant was provided to the Committee (see Table 6.7). This data points to some insurers having a low ‘win rate’, which suggests problems in their IDR systems. However, for many insurers, a very high proportion of claims are settled before progressing to an AFCA determination (in some cases over 80 per cent are settled). In these cases, the rate of settlements that favour the insurer or the policyholder is unclear. Therefore, the win-loss ratio at AFCA for the minority of cases that make it to that stage isn’t necessarily a clear indicator of the rate at which the insurer was deemed at fault across the full range of EDR cases. The data for both IDR and EDR is not sufficiently clear or consistent to make useful comparisons across insurers at present. This needs to be remedied. The new data reporting regime proposed by the Committee will go a long way to improving transparency in relation to both IDR and EDR.

6.125The Committee acknowledges that insurers have provided evidence that they have reflected upon their performance during the major floods, including conducting internal reviews, and have sought to improve their IDR processes through increased staffing, training and resourcing, as well as improvements to technology and operating models.

6.126Insurers asserted that they have made changes following internal reviews and in response to the findings and recommendations of the Deloitte report, which recommended insurers undertake improved workforce planning to support better timelines on complaint handling, better catastrophe resourcing and training to maintain a baseline level of skills, as well as addressing deficiencies in both claims and complaint handling systems through better technologies.[109] The Deloitte report also found that complaint handling processes were impacted by the same issues as claim handling, but to a lesser degree.[110]

6.127While it is preferable for insurers and policyholders to resolve any issues that may arise as the claim is progressed, it is important that, when an insurer and policyholder cannot agree, policyholders can access fair and timely dispute resolution. Insurers should endeavour to continue to improve their IDR processes and resourcing in line with regulatory expectations.

6.128It is evident to the Committee that impacted individuals, who are often displaced and have experienced significant trauma and stress, can be reluctant to pursue IDR and EDR because they believe it will add further delays to an already lengthy claims process. Delays in processing internal complaints, as well as much longer average complaint resolution timeframes with AFCA, meant some policyholders chose not to make use of the dispute resolution services available to them.

6.129The Committee also wishes to recognise the role of consumer advocacy, financial rights and legal aid groups in assisting policyholders though IDR and EDR processes following the major floods. This was particularly important for vulnerable policyholders and policyholders with complex, long running disputes.

6.130The Committee has identified several areas for improvement to make the IDR and EDR process more accessible for policyholders. Some of these recommendations align with the recommendations made in the Deloitte report on insurers preparedness for CAT 221 and ASIC’s review on insurers claims handling.

6.131The Committee has made recommendations for the insurance industry (through Code amendments or otherwise) and relevant government agencies to implement.

6.132Given the inconsistency of information provided by insurers on the number of complaints received and timeframes for resolving complaints, the Committee is recommending ASIC update RG 271 Internal Dispute Resolution to provide more guidance on what constitutes a complaint and how complaints should be recorded to drive consistency in the treatment and capture of complaints by insurers, to provide more consistent outcomes for policyholders and allow ASIC to better understand how other factors (such as understaffing) may be affecting the timely resolution of complaints.

6.133This guidance can then supplement the joint Australian and New Zealand Standard definition to allow for consistent and meaningful reporting of internal dispute resolution statistics by insurer, to both AFCA and ASIC.

6.134The Committee believes greater consistency in identifying and tracking complaints is needed for insurers to better understand the issues being raised by policyholders, including to identify if more guidance should be issued to policyholders or their staff.

6.135The Committee is also recommending insurers establish a dedicated dispute resolution monitoring and management team to identify systemic issues coming through in complaints and to implement AFCA’s feedback to improve IDR and claims handling processes. This should be paired with the escalation of any unresolved cases to more experienced case managers after 12 months open.

6.136Additionally, the Committee is recommending that all insurers establish a consumer advocate role, to further monitor and report on disputes to the CEO and Board, with the ability to be involved in the management and resolution of disputes where appropriate.

6.137The Committee recommends that the Australian Securities and Investment Commission update RG 271 Internal Dispute Resolution to provide further guidance on what constitutes a complaint and how complaints should be recorded. The goal should be to ensure that the definition of an internal dispute is set at a level that captures appropriately serious disputes and that this threshold is applied consistently across all insurers.

6.138The Committee recommends that all insurers be required to establish a dedicated internal dispute resolution monitoring and review team to identify systemic issues arising through complaints and implement the Australian Financial Complaints Authority’s feedback to improve internal dispute resolution and claims handling processes.

6.139The Committee recommends that insurers put in place strategies to ensure their internal dispute resolution teams will be appropriately resourced and trained to respond to future significant natural disasters, and able to critically analyse expert reports and investigate the circumstances of the claim.

6.140The Committee recommends that insurers improve their processes to facilitate the escalation of cases that remain unresolved after 12 months to a more experienced case manager.

6.141The Committee recommends that all insurers create a role for a ‘consumer advocate’ which has oversight of and, where appropriate, involvement in, the disputes managed within the firm, cases that have moved to the Australian Financial Complaints Authority (AFCA), and claims which have taken a long period of time to resolve.

The consumer advocate should report to the Chief Executive Officer quarterly and the Board each year and provide a summary of the activities of the office over the preceding 12 months including a summary of cases where the consumer advocate was involved, the disputes that went to AFCA and the firm’s overturn ratio, and where long delays occurred before the case was resolved (longer than 12 months).

Footnotes

[1]Ms Rebekah Doran, Senior Solicitor and Project Manager, Legal Aid NSW, Committee Hansard, Richmond, 9 May 2024, p. 36.

[2]Available at: Australian Securities and Investments Commission (ASIC), Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021.

[3]Corporations Act 2001 s. 912A(2) and s. 1017G.

[4]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 36.

[5]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 13.

[6]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 19.

[7]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 19.

[8]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 35.

[9]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 36.

[10]ASIC, IDR data reporting handbook, 28 April 2023, p. 3.

[11]ASIC, IDR data reporting handbook, 28 April 2023, p. 7.

[12]ASIC, IDR data reporting handbook – Table 9: General Insurance, 28 April 2023, pp. 31-32.

[13]ASIC, IDR data reporting handbook – Table 17: Complaint issue, 28 April 2023, pp. 37-39.

[14]ASIC, IDR data reporting handbook – Table 18: Complaint outcome, 28 April 2023, p. 40; More detail regarding IDR reporting processes, including the Handbook can be accessed at https://asic.gov.au/regulatory-resources/financial-services/dispute-resolution/internal-dispute-resolution-data-reporting/

[15]Insurance Australia Group (IAG), Submission 16, pp. 20-21.

[16]For example: Allianz Australia, Submission13, p. 32; Youi, Submission14, p. 8; Suncorp Group, Submission 12, p. 30; Hollard Holdings Australia, Submission 19, p. 23.

[17]IAG, Submission 16(1), p. 2: Suncorp Group, Submission 12, p. 30.

[18]Suncorp Group, Submission 12, p. 30.

[19]Suncorp Group, Submission 12, p. 30; Youi, Submission 14, p. 15.

[20]As per correspondence provided by the ICA on request, August 2024.

[21]See: Suncorp Group, Supplementary Submission 12.2; Allianz Australia, Supplementary Submission 13.3;Youi, Supplementary Submission 14.3; RACQ Group, Supplementary Submission 15.2; Insurance Australia Group, Supplementary Submission 16.4; QBE Insurance Group, Supplementary Submission 17.4; Auto & General Holdings, Supplementary Submission 18.3;Hollard Holdings Australia, Supplementary Submission 19.2.

[22]Financial Rights Legal Centre, CHOICE, Consumer Action Law Centre and Westjustice, Submission 27, p.64.

[23]Legal Aid Queensland, Submission 8, p. 8.

[24]Financial Counselling Australia, Submission 6, p. 8.

[25]General Insurance Code Governance Committee, Submission 5, p. 4.

[26]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 21.

[27]ICA, General Insurance Code of Practice, 5 October 2021, p. 38.

[28]Mr Alan Kirkland, Commissioner, ASIC, Committee Hansard, 2 February 2024, p. 16.

[29]Ms Philippa Heir, Managing Lawer, Consumer Action Law Centre, Committee Hansard, 31 January 2024, p.4.

[30]ARC Justice, Submission 9, p. 8.

[31]Ms Philippa Heir, Managing Lawer, Consumer Action Law Centre, Committee Hansard, 31 January 2024, p.11.

[32]For example: ARC Justice, Submission 9, p. 8; Legal Aid Queensland, Submission 8, p. 6.

[33]Mr Tyrone Shandiman, Chairperson, Australian Consumers Insurance Lobby, Committee Hansard, 1 February, p. 33.

[34]Ms Ma’ata Solofoni, Senior Solicitor, Disaster Recovery and Insurance, Legal Aid New South Wales, Committee Hansard,31 January, p. 36.

[35]Ms Philippa Heir, Managing Lawer, Consumer Action Law Centre, Committee Hansard, 31 January 2024, p.5.

[36]Ms Philippa Heir, Managing Lawer, Consumer Action Law Centre, Committee Hansard, 31 January 2024, p.11.

[37]ASIC, Regulatory Guide 271 Internal Dispute Resolution, 2 September 2021, p. 13.

[38]Disaster Legal Help Victoria, Submission 7, p. 3.

[39]Ms Kate Clohesy, Director, Strategy and Impact, ARC Justice, Committee Hansard, 1 February 2024, p. 37.

[40]Ms Ma’ata Solofoni, Senior Solicitor, Disaster Recovery and Insurance, Legal Aid New South Wales, Committee Hansard,31 January, p. 33.

[41]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 41.

[42]AFCA, Submission 1, p. 6.

[43]For example: Legal Aid Queensland, Submission 8, p. 12; Disaster Legal Help Victoria, Submission 7, p.6.

[44]Disaster Legal Help Victoria, Submission 7, p. 6.

[45]Financial Rights Legal Centre, CHOICE, Consumer Action Law Centre and Westjustice Submission 27, p.66.

[46]Financial Counselling Australia, Submission 6, p. 9.

[47]Ms Rebekah Doran, Senior Solicitor and Project Manager, Legal Aid New South Wales, Committee Hansard, Richmond, 9 May 2024, p. 36.

[48]AFCA, Submission 1, p. 37.

[49]AFCA, Submission 1, p. 49; AFCA also publishes extensive complaints data on its website, available at: https://data.afca.org.au/

[50]AFCA, Submission 1, p. 6.

[51]AFCA, Submission 1, p. 37.

[52]AFCA, ‘The process we follow’, www.afca.org.au/what-to-expect/the-process-we-follow, viewed 28 May 2024.

[53]AFCA, Operational Guidelines to the Rules, 1 January 2024, Section D.

[54]AFCA, ‘The AFCA Approach to non-financial loss claims’, www.afca.org.au/media/335/download, viewed 25 June 2024, p. 3.

[55]AFCA, Complaint Resolution Scheme Rules, 1 July 2024, p. 42.

[56]AFCA, Submission 1, p. 39.

[57]Ms Emma Curtis, Lead Ombudsman, AFCA, Committee Hansard, 21 February 2024, p. 43.

[58]AFCA, Operational Guidelines to the Rules, 1 January 2024, p. 158.

[59]AFCA, Operational Guidelines to the Rules, 1 January 2024, p. 158.

[60]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 28.

[61]AFCA, Submission 1, p. 12.

[62]AFCA, Submission 1, p. 13.

[63]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 34.

[64]AFCA, Submission 1,p. 5.

[65]AFCA, Supplementary Submission 1.2, p. 12.

[66]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 29.

[67]AFCA, Submission 1, p. 21.

[68]AFCA, Submission 1, p. 14.

[69]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 30.

[70]AFCA, Supplementary Submission 1.2, p. 12.

[71]AFCA, Submission 1, p. 15.

[72]See: Suncorp Group, Supplementary Submission 12.2; Allianz Australia, Supplementary Submission 13.3;Youi, Supplementary Submission 14.3; RACQ Group, Supplementary Submission 15.2; Insurance Australia Group, Supplementary Submission 16.4; QBE Insurance Group, Supplementary Submission 17.4; Auto & General Holdings, Supplementary Submission 18.3;Hollard Holdings Australia, Supplementary Submission 19.2.

[73]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 29.

[74]Ms Emma Curtis, Lead Ombudsman, Insurance, AFCA, Committee Hansard, 21 February 2024, p. 40.

[75]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 30.

[76]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 41.

[77]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, p. 41.

[78]Mr Justin Untersteiner, Chief Operating Officer, AFCA, Committee Hansard, 21 February 2024, pp. 28-29.

[79]AFCA, Submission 1, p. 21.

[80]ACFA, Supplementary Submission 1.2, p. 13.

[81]Ms Kathryn Swinton, Financial Counsellor, Anglicare Victoria, Committee Hansard, Maribyrnong, 17 April 2024, p. 30.

[82]Caxton Legal Centre, Submission 28, p. 6.

[83]Mr Tyrone Shandiman, Chairperson, Australian Consumers Insurance Lobby, Committee Hansard, 1February 2024, p. 25.

[84]Ms Rebekah Doran, Senior Solicitor and Project Manager, Legal Aid New South Wales, Committee Hansard, Richmond, 9 May 2024, p. 35.

[85]Ms Rebekah Doran, Senior Solicitor and Project Manager, Legal Aid New South Wales, Committee Hansard, Richmond, 9 May 2024, p. 35.

[86]Ms Sharon Keith, Program Manager, Disaster Legal Help Victoria, Committee Hansard, 31 January 2024, p.24.

[87]Ms Kate Clohesy, Director, Strategy and Impact, ARC Justice, Committee Hansard, 1 February 2024, p. 37.

[88]Ms Rebekah Doran, Senior Solicitor and Project Manager, Legal Aid New South Wales, Committee Hansard, Richmond, 9 May 2024, p. 35.

[89]Financial Rights Legal Centre, CHOICE, Consumer Action Law Centre and Westjustice, Submission 27, p. 9.

[90]Ms Philippa Heir, Managing Lawer, Consumer Action Law Centre, Committee Hansard, 31 January 2024, p.8.

[91]Ms Ma’ata Solofoni, Senior Solicitor, Disaster Recovery and Insurance, Legal Aid NSW, Committee Hansard, 31 January 2024, p. 33.

[92]Ms Kate Clohesy, Director, Strategy and Impact, ARC Justice, Committee Hansard, 1 February 2024, p. 37.

[93]Legal Aid NSW, Submission 34, p.15.

[94]Mr Aran Matkevich, Solicitor, Northern Rivers Community Legal Centre, Committee Hansard, 11 April 2024, p. 33.

[95]Mr Untersteiner, AFCA, Committee Hansard, 21 February 2024, p. 31.

[96]Department of the Treasury, Review of the Australian Financial Complaints Authority, https://treasury.gov.au/publication/p2021-219154, November 2021, p. 58.

[97]Mr Ken Olsson, Private capacity, Committee Hansard, Caboolture, 9 April 2024, p. 18.

[98]Committee Survey Results, free text entries.

[99]Ms Aveley McCann, Private capacity, Committee Hansard, Lismore, 11 April 2024, p. 23.

[100]Ms Kate Olivieri, Private capacity, Committee Hansard, Lismore, 11 April 2024, p. 25.

[101]Ms Maureen Valent, Private capacity, Committee Hansard, Richmond, 9 May 2024, p. 41.

[102]AFCA, Submission 1, p. 49.

[103]RACQ Group, Submission 15, p. 27.

[104]Insurance Australia Group, Submission 16, p. 41.

[105]QBE Insurance Group, Submission 17, p. 20.

[106]AFCA, Submission 1, p. 49.

[107]Hollard Holdings Australia, Submission 19, p. 45.

[108]Youi, Submission 14, p. 31.

[109]Deloitte, The new benchmark for catastrophe preparedness in Australia, October 2023, pp. 38, 39.

[110]Deloitte, The new benchmark for catastrophe preparedness in Australia, October 2023, p. 17.