Insurance changes needed to better protect consumers in disasters: Report

Insurance changes needed to better protect consumers in disasters: Report
Insurance changes needed to better protect consumers in disasters: Report

The insurance industry has come under heavy fire for the way it handled claims from those who suffered property and other losses in the wake of the flood disasters in Queensland and Victoria, following the release of the much-awaited parliamentary report chaired by Labor MP Graham Perrett.

The House of Representatives Legal Affairs Committee report In the Wake of Disasters provides numerous examples of the delays, frustrations and heartache suffered by some claimants due to insurance companies’ responses.

More than three-quarters (78%) of 625 people surveyed as part of the report said their claim had been settled “slowly” or “very slowly”.

More than 75% of those surveyed said their claims related to home and contents insurance.

“Victims of extreme weather events all over Australia faced unacceptable delays in the assessment of their claims; misunderstandings about the scope and extent of their polices; a lack of information or communication from insurers; discrepancies or inaccuracies in damage assessments or third-party expert reports; and token efforts at dispute resolution,” says Perrett in his introduction to the report.

“Those who tried to assert their rights in the labyrinth of the claims process found themselves on the wrong side of a power imbalance.

“The committee concluded that consumer protections need to be increased, particularly in the claims-handling process. The best way to do this is to remove the legislative exemptions that the insurance industry currently enjoys, and bridge the gaps in consumer protection.” 

Perhaps the most damning line in the lengthy report is: “Indeed, the greater the disaster, the greater the vacuum of consumer protections”.

The report recommends that corporate watchdog ASIC be appointed to oversee the handling and settlement of claims, along with a host of changes to the way insurance companies interact with claimants.

Among the 13 recommendations made in the report, the committee wants General Insurance Code of Practice to be amended by July 1, 2012 to include the following minimum standards for claims handling in times of exceptional circumstances such as declared disasters:

  • a timeframe for informing claimants of the progress of the claim;
  • a timeframe for advising claimants if an external expert has been appointed;
  • assurance that external experts are fully qualified to undertake assessments;
  • an undertaking to provide claimants with information about the qualifications, employer, and role of external experts that are appointed to assist with their claim;
  • a maximum timeframe of 12 weeks for external experts to provide reports;
  • a maximum timeframe for accepting or denying a claim;
  • a timeframe for responding to requests for information;
  • an undertaking to communicate all decisions about insurance claims to the claimant in writing with clear and explicit reasons relating to their particular claim; and
  • a timeframe for informing claimants of the progress of their complaint or dispute.

Other key recommendations include that Bill Shorten, the Minister for Financial Services and Superannuation, “immediately establish a joint industry-government action group to address evidence of the rising costs and market failure of insurance premiums across Australia”.

The full list of all 13 recommendations of the report can be found here.

“I urge governments and the insurance industry to implement these recommendations with the utmost speed so that policyholders can have peace of mind for future, inevitable natural disasters,” says Perrett.

The report includes numerous examples of submissions made by exasperated claimants in relation to property claims, such as: “I have had five people come to assess my property and still nothing has happened”. 

The Caxton Legal Centre told the inquiry it had cases where hydrologists had still not visited a person’s property six and seven months after the event. 

Residents in Loddon Shire in rural north-west Victoria told the inquiry they felt they had been neglected due to their rural location or distance from major centres, and that larger towns and more vocal groups had been given a higher priority. 

“Central Goldfields Shire residents queried whether the ‘lack of publicity affected the willingness of insurance companies to come to the party’,” the report says. 

“Some residents met with further disadvantage due to their rural locations: vouchers provided by insurers for replacing house contents could only be used at designated retailers out of town, some more than kilometres away.” 

The report notes that in many instances “insurers did not meet the standards, in particular the timeframes, contained in the code when responding to the large volumes of claims arising from natural disasters.” 

One person recounted that “the process of dealing with the insurance company was more stressful than the actual natural disaster”. Another said “the stress of following up with the assessor appointed by the insurance company and the insurance company itself was far worse than dealing with the clean-up”. Yet another recounted that “due to the lengthy time response, my husband and small family are hurting more mentally and emotionally than the actual financial loss”.

Responding to the report, ICA chief executive Rob Whelan says the general insurance industry had handled “an unprecedented 275,000 claims stemming from extreme weather in 2011, with insurance losses of almost $5 billion”. 

Whelan says many of the Perrett report’s recommendations listed changes already enacted by either the insurance industry or the federal government. 

He says current dispute resolution processes had proven robust and effective, and further government and regulator intervention are not necessary.

Photo courtesy of Flickr.

 

 


Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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