Almost a quarter of all calls to the Insurance Law Service hotline are about insurance investigations, raising serious concerns about tactics used by general insurance companies in claims handling and assessment.
This is one of the key findings in a new report Guilty until Proven Innocent: Insurance investigations in Australia released today by the Financial Rights Legal Centre. The Report details the trials faced by 40 consumers subject to investigations.
“The tactics revealed in the recent CommInsure scandal are the tip of the iceberg when it comes to claims handling abuses in the insurance industry,” said Alexandra Kelly, Financial Rights Principal Solicitor. “We regularly hear of consumers being threatened with the rejection of their claim or other outrageous conduct such as having their relatives reported to immigration. Many of our clients feel than they have been subject to racial profiling and others with poor English skills have not had access to appropriate translators. Consumers are also subject to incredibly long interviews – sometimes over five hours in length. Our clients routinely feel bullied, harassed and intimidated by investigators and often describe being treated like criminals.”
In addition to case studies the Report also draws on a survey of insurance law service callers, interviews with insurers and investigators as well as an analysis of Financial Ombudsman Service decisions. It found that the average investigation and dispute length is close to 18 months with some taking over three years.
“In the end the investigation process is so onerous that many simply withdraw their claim – not because of any admission of fraudulent behaviour but because the process is too burdensome or invasive for many consumers to bear. What we see though when insurer’s allegations of fraud are actually put to the test by the industry referee is that that the vast majority are simply unfounded.”
The Report found that the incidence of insurance fraud is routinely exaggerated by the insurance industry.
“The industry regularly throws around a $2.1 billion annual insurance fraud figure but it turns out that this is based on a 20 year old estimated percentage of claims insurers “believed to be fraudulent” rather than on any proven fraudulent claim data. We of course are not saying that fraud doesn’t exist. It does. However it is this type of exaggerated rhetoric that builds a ‘guilty before proven innocent’ culture and ultimately helps justify the industry’s poor treatment of policyholders.”
The Report details the current lack of consumer protections and proposes a series of recommendations to improve the situation for both consumers and the industry.
“Decisive action needs to be taken by the entire insurance industry to address the public’s legitimate concerns over their treatment in claims handling and investigations. At a minimum the general insurance industry needs to establish a set of good practice standards for investigations under its Code of Practice. In life insurance, a strong and effective Code of Practice addressing consumer concerns and registered by ASIC needs to be introduced.”
For further information contact Drew MacRae, Policy and Advocacy Officer, Financial Rights Legal Centre on 0404604978
About Financial Rights
The Financial Rights Legal Centre is a community legal centre that specialises in helping consumer’s understand and enforce their financial rights, especially low income and otherwise marginalised or vulnerable consumers. We provide free and independent financial counselling, legal advice and representation to individuals about a broad range of financial issues. We operate the Insurance Law Service which provides advice nationally to consumers about insurance claims and debts to insurance companies. Financial Rights also operates the Credit & Debt Hotline, which helps NSW consumers experiencing financial difficulties. Financial Rights took over 26,000 calls for advice or assistance during the 2014/2015 financial year.