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Insurers warned as claims-related code breaches soar

March 6, 2018

The number of claims-related breaches to the General Insurance Code of Practice grew 73% last financial year, with the code’s governance committee saying the huge rise is partly due to catastrophes increasing pressure on insurers.

The committee has reported 6613 claims-related breaches – including 10 significant ones – representing nearly three-quarters of all code non-compliance incidents.

“This trend highlights the need for code subscribers to maintain rigorous compliance frameworks for claims handling and do more to prepare for influxes of claims so service standards are maintained during times of high claims volume,” committee chairman Lynelle Briggs says in a new report.

Consumers lodged 182,565 catastrophe-related claims, compared with 41,114 the previous year, with total estimated losses about $2.76 billion.

Insurers subscribing to the code handled more than 29,000 internal disputes – little changed from a year earlier – with 87% of disputes related to claims.

But while the number of internally handled disputes held steady, external disputes referred to the Financial Ombudsman Service increased.

Increases in both claims and declined claims in the past five years have not translated to growth in related internal disputes.

Ms Briggs says the code committee’s ability to identify and understand trends is hampered by incomplete data, and she has repeated her call for the two-stage internal complaints process to be replaced with a single-stage process.

“This would improve complaint handling timeframes, reduce complexity for consumers and lay the groundwork for data collection that would provide a full picture of the internal complaints process and any emerging issues,” she says in the report.

Insurers issued 41 million retail policies last financial year, down 7% on the previous year, according to the committee’s report.

The number of individual policies issued by subscribers fell 8%, while group policies grew more than 300% to almost 220,000, including an eight-fold increase in group travel cover typically acquired as a complimentary benefit of a credit card.

“However, the committee’s claims data revealed that the travel claims acceptance rate was low and decreasing, partly because consumers were not activating their travel policies.”

Claims lodged grew 7% to more than 4 million, increasing in all retail classes except sickness and accident.

Declined retail claims increased a combined 11% across the major classes of home, personal and domestic property, travel and motor, but overall claims acceptance rate was steady at 95.8%.

The number of wholesale policies issues last year declined 2.3% to 3 million. 

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