The insurance industry could be relying on erroneous or misleading information concerning consumers and their claims history when quoting, assessing new claims or setting premiums, a damning report commissioned by Financial Rights has found.
The report Privacy Practices in General Insurance by Roger Clarke and Nigel Waters examined the data access and handling practices of general insurers, including the accuracy of claims data contained in My Insurance Claim Reports.
It makes 16 recommendations including that the Australian Government should step in to regulate industry-wide reporting of general insurance claims in the same manner as credit reporting.
The report involved field research where consumers were asked to access personal data held by their insurers as well as their My Insurance Claims Report via the Insurance Reference Service (IRS) – the existing industry scheme for sharing personal data.
My Insurance Claim Reports contain consumers’ historical claims records that may be relied upon by insurers when quoting or assessing claims or setting premiums.
Financial Rights Legal Centre Chief Executive Officer Karen Cox said the insurance industry’s work revolves around accessing and handling sensitive data about risk. Yet this report’s findings paint a picture of an industry whose data handling practices are a cause for concern.
The report found that every My Insurance Claims Report obtained by consumers as part of the field study contained at least one material error such as additional or missing claims, misleading or inconsistent information, and incorrect personal details such as addresses.
Incorrectly attributing a claim to a policyholder and wrong claims statuses, if relied on by an insurer, could affect the determination of a claim or a premium, Ms Cox said.
The Insurance Council of Australia recently recommended that My Insurance Claim Reports should be used by policyholders to assist in satisfying their disclosure requirements. This recommendation needs to be seriously reconsidered in the light of the findings in this report, Ms Cox said.
“Given their dubious quality, My Insurance Claim Reports should not be relied upon by either insurers or consumers – they are both a waste of time and a waste of $22,” she said.
“The Australian Government needs to step in to regulate industry-wide reporting of general insurance claims in the same manner as credit reporting or shut it down altogether.”
There were also profound difficulties in accessing personal data. The IRS sells My Insurance Claims Report through its partner Ilion and consumers need to “apply” for an application” form to receive their My Insurance Claims Report between 4-6 days later. The form is extremely difficult to fill out with consumers needing to navigate 4-point fonts and wingdings.
The report also found that processes for obtaining personal data from insurers was convoluted, confusing and unnecessarily difficult despite it being a legal right under the Privacy Act.
“Insurers made it difficult for consumers to access their personal data. Even when information was obtained, it was often either so little as to be of no utility, or so voluminous that it was incomprehensible. Two consumers received around 150 pages of jargon and screenshots.”
Ms Cox said the Australian Government’s plans to extend the Consumer Data Right to the general insurance industry, provided a once-in-a-generation opportunity to improve data standards, privacy practices and outcomes for both consumers and the insurance sector.
“This can only be achieved by putting consumer protection at the front and centre of the new CDR regime and ensuring privacy-by-design principles are built in to prioritise safety, security and consumer confidence,” Ms Cox said. “Without this the CDR may simply perpetuate an already failing system.”
The full report can be obtained on the Financial Rights publications page: https://financialrights.org.au/publication/
Privacy Practices in General Insurance by Roger Clarke and Nigel Waters of Xamax Consultancy is the fourth report in our Future of Insurance series.
The first report Open Insurance and Consumer Data examinedthe potential consumer benefits and risks associated with an improved ability to access specified data held about them by insurers, and to authorise the secure disclosure of that data to third parties.
The second report Automating General Insurance Disclosure examined close to 400 cases of Australians being denied insurance claims for not fully disclosing relevant information and whether Government should enable the pre-filling of Australians’ driving records and insurance claims history information required for disclosure purposes.
The third report Standardising General Insurance Definitions by Dr Diana Grace PHD and Professor Michael Platow PHD examined a lack of consistent definitions in general insurance and the impact this is likely to have on the implementation of the Australian Government’s Consumer Data Right reforms to general insurance.
Privacy Practices in General Insurance and the entire Future of Insurance series was produced with grant assistance from the Ecstra Foundation to examine – from a consumer’s perspective – the future of insurance and the new concept of Open Insurance – the application of the Consumer Data Right to the insurance industry.
The CDR will provide insurance consumers with the ability to efficiently and conveniently access specified data held about them by data holder insurers, and to authorise the secure disclosure of that data to third parties (accredited data recipients) or to themselves.
For further information contact Drew MacRae email@example.com or 0404 604 978