Financial Rights Legal Centre has called on the general insurance industry to commit to radically improving customer communications. Clear and consistent policies, particularly around ‘wear and tear’ exclusions, also need urgent industry-wide attention.
Financial Rights’ call for change is in response to the release of Report 768 Navigating the storm: ASIC's review of home insurance claims (REP 768). The report recognises that good customer communication and a clear pathway through the claims process are critical to a good customer experience – even where the outcome may not be what was sought.
Financial Rights CEO Karen Cox commented in response to the report:
“These report findings reflect the range of client experiences that we have heard on the Insurance Law Service over the past two years and that we continue to hear every day”.
“Regular, consistent and well timed communication is key and would work to lower the anxiety of insurance customers faced with additional stresses borne of temporary accommodation limitations, unreadable scope of works and assessment documents and cash settlement conversations.”
ASIC’s report highlights that ‘wear and tear’ exclusions are not well understood by customers.
“The key pain point for our clients has been claims denials based on maintenance, wear and tear or defect clauses. These issues accounted for almost one in three extreme weather event callers to the Insurance Law Service.”
“After an extreme weather event insurers regularly assert damage to homes is not in fact from the event, but instead the result of a lack of maintenance or wear and tear with little to no evidence. Insurers don’t explain what maintenance should have been done, they don’t explain how that maintenance would have made a difference and they don’t show causation between lack of maintenance and the end result.”
“Insurers have shifted the onus on to already stressed and at times traumatised customers to collect evidence including expensive and hard to obtain expert reports. This is just not good enough.”
“The industry needs to develop a consistent approach to maintenance and wear and tear, detailing what is required for a property to be maintained. Insurers should only rely upon these exclusions where:
- the insurer has clear evidence,
- the insurer can identify the maintenance that would have been reasonably expected by the insured, and importantly
- the difference that maintenance would have made to the end result.”
ASIC’s report found five key areas for improvement:
- better communication with consumers about decisions, delays and complications;
- better project management and oversight of third parties;
- better recognition and management of expressions of dissatisfaction and complaints;
- better identification and treatment of vulnerable consumers; and
- better resourcing of claims handling and dispute resolution functions.
The increased frequency of severe weather events is also challenging the ability of insurers to respond to claims in an appropriate and timely manner.
Almost 35% of the services Financial Rights provided to those impacted by extreme weather from 2020-2022 involved complaints about poor claims handling including long delays, poor communication, denial or partial denial based on inadequate evidence and low quality repairs..
Research from a coalition of advocacy groups including Financial Rights launched last week also found that the home and contents insurance market is failing to protect people against extreme weather events, with customers struggling to access and afford the insurance they need. Poor claims handling exacerbates the disaster unfolding for Australians.
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About Financial Rights
Financial Rights is a community legal centre that specialises in helping consumers 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. Financial Rights operates the National Debt Helpline, which helps NSW consumers experiencing financial difficulties. We also operate the Mob Strong Debt Help services which assist Aboriginal and Torres Strait Islander Peoples with credit, debt and insurance matters.