'Be proactive': AFCA wants insurers to communicate better with claimants

The Australian Financial Complaints Authority (AFCA) says it expects general insurers to do better following “significant” increases in disputes in the last financial year.

General insurance complaints rose to 18,563 in the 2021/22 period from 16,912 a year earlier including a 54% rise in disputes related to delays in claim handling.

AFCA singled out communication as an area in need of improvement, saying the industry needs to review its engagement process with customers after a claim is lodged.

“We urge insurers to be proactive and innovative in resolving complaints early, including by communicating regularly and effectively with their customers about delays in claim finalisation,” AFCA says in its 2021/22 annual review.

AFCA acknowledges insurers are facing challenges following recent natural disasters including the costliest flood catastrophe earlier this year while also having to cope with supply issues, especially with building materials, motor parts and tradie shortages.

However, Lead Ombudsman Insurance Emma Curtis says the ombudsman expects “insurers to do everything they can to progress claims”.

“They need to keep customers informed about the progress of their claim,” Ms Curtis told insuranceNEWS.com.au.

“And they need to give them all the information they need to make what are very important decisions such as whether to accept a cash settlement or have the insurer do the work.”

She says the key thing is that insurers need to keep their customers up to date.

“The absence of this engagement can sometimes cause complaints,” Ms Curtis said.

AFCA says for this financial year, it expects insurers to increase their early resolution outcomes and change practices to reduce complaints about service and delays.

“We encourage firms to explore ways to lift the resolution rate at Registration and Referral above 44%,” AFCA says.

More than half of overall complaints that AFCA receives are resolved at the Registration and Referral stage, meaning the ombudsman refers the case back to the financial firm involved and asks them to work with the complainant.

Ms Curtis says AFCA does not set targets but points out the bank sector has increased its early resolution rate since AFCA started in 2018, to 58% from 46%.

She says banks have achieved higher early resolution outcomes by finding different ways to engage with their customers to resolve their concerns.

“We encourage sectors such as insurers to review what other sectors are achieving, such as banks, and we share best practice and insights to help financial services firms lift performance generally,” Ms Curtis said.

“This helps both firms and consumers by resolving complaints early where possible.”

She says with unprecedented insurance claim and complaint volumes, it is very timely for insurers to review their early resolution rate.

“Many complaints can be resolved early by engaging with customers and giving them confidence that their claims will be resolved, even if that process is taking longer than normal,” Ms Curtis said.

“By resolving complaints early, this allows insurers to focus on more complex and difficult complaints, and it means that consumers with straightforward complaints can move on with their lives.”

She says early resolution of complaints not only saves firms money and resources but it also frees up AFCA to focus on more complex complaints.

Click here for the AFCA annual review’s general insurance section.