AFCA concerned over level of flood claim complaints

Disputes with insurers after record floods struck NSW and Queensland a year ago have led to thousands of complaints being lodged at the Australian Financial Complaints Authority (AFCA) from affected policyholders.

AFCA is “concerned by the volume” of complaints about claims handling delays by insurers, Chief Ombudsman and CEO David Locke says, as well as overall complaints about general insurance – with 17,163 received since July 1, up 65% from 10,417 at the same point a year ago.

AFCA has awarded $12.9 million in compensation and refunds from insurers to policyholders affected by the flood event.

“We would prefer to see insurers resolving many more complaints within their own dispute resolution process rather than consumers having to take the extra step of coming to AFCA – prolonging the time they spend in limbo, unable to get on with their lives,” Mr Locke said.

“These sorts of complaints can often be avoided through good, regular communication with customers,” he said, while acknowledging the scale of the flood event had put pressure on insurers.

The floods – Australia’s costliest ever natural catastrophe – produced insured losses of $5.76 billion from 240,000 claims, Insurance Council of Australia (ICA) data shows. There remain 46,000 claims still outstanding, while 81% are now closed.

At the end of last week, 2021 related complaints had been registered at AFCA, split fairly evenly between the two states. 1328 cases have been closed – 74% by agreement or in favour of complainants.

AFCA’s next most significant weather-related event, February 2020 south-east coast storms, generated 493 complaints.

Delays in claim handling was the most significant issue, AFCA says, accounting for 37% of 2022 flood complaints to AFCA. Denial of claims because of policy exclusions or conditions accounted for a third of complaints, while disputes over claim amount made up just over a quarter.

About three-quarters of complaints were for home building insurance, followed by 9% for home contents and 5% landlord insurance.

AFCA says 40% of the flood complaints were resolved at the earliest stage of its process – registration and referral, when a complaint is referred back to the firm to resolve. That was below the annual rate of 51% last fiscal year.

Lead Ombudsman Insurance Emma Curtis says the heavy flow of unresolved insurance complaints means AFCA has not been able to address complaints as quickly as usual and had increased its resources and capacity significantly over the past year.

AFCA also introduced new ways to regularly update consumers on the progress of their complaints.

“By working closely with insurers to help them resolve simpler complaints early, and take a consumer-centric approach, we are confident complaint volumes will reduce over time,” she said. “We expect insurers to do all they can to assess claims promptly, to regularly inform customers about expected timeframes, and to clearly communicate about claims options.”