IFSO warns consumers to review insurance policies amid rise in complaints
IFSO warns consumers to review insurance policies amid rise in complaints | Insurance Business New Zealand
Insurance News
IFSO warns consumers to review insurance policies amid rise in complaints
“She’ll be right” attitude could lead to costly claim surprises, according to ombudsman
Insurance News
By
Roxanne Libatique
The Insurance & Financial Services Ombudsman (IFSO) Scheme is reminding New Zealanders to thoroughly review their insurance policies to avoid misunderstandings about coverage, as consumer complaints continue to rise.
“Every year, we see complaints from people disappointed that their insurance isn’t covering them for what they thought it would,” she said.
She said New Zealanders often take a “she’ll be right” attitude, which could lead to issues when the time comes to make a claim.
“When claim time comes, we can be in for a big shock if we are expecting something different to what we’ve actually signed up for,” Stevens said.
Insurance coverage dispute in New Zealand
One recent case highlighted by the IFSO involved a vehicle insurance claim.
A woman’s car was damaged when AdBlue, a diesel exhaust fluid, was mistakenly added to the fuel tank. She expected her insurer to cover the accidental damage, but her claim was rejected based on a policy exclusion related to using incorrect fuel or additives.
New Zealanders must familiarise themselves with their policy
Stevens emphasised that consumers need to familiarise themselves with their policy terms and conditions, particularly exclusions.
“Consumers should read their policies and understand, first, what cover they have and, second, the limitations on that cover or the exclusions,” she said.
She explained that the details of what is covered are clearly laid out in the policy, and it is the consumer’s responsibility to understand those terms. If the terms are not suitable, it is worth shopping around for a better fit being finalising a policy.
“My advice is to ‘take time before you sign’ – keep asking your insurer or broker questions until you fully understand, and always get hold of the policy and work out what will and won’t be covered,” she said.
While insurers struggled with the increased workload following these extreme weather events, Stevens noted that the sector has improved its processes since the Christchurch earthquakes, resulting in quicker claims processing.
However, she warned that misunderstandings about what is covered remain a common issue, especially when it comes to property insurance.
“For example, most house insurance only covers sudden damage, not gradual damage,” she said.
Insurance complaints per segment in New Zealand
The majority of complaints handled by the IFSO Scheme related to general insurance products, such as home, vehicle, contents, and travel insurance, which accounted for 68% of the total complaints.
Health, life, and disability insurance represented 21%, while the remaining 11% concerned financial services such as loans and credit.
House insurance claims were the most frequent area of complaint, making up 24% of all cases, followed by travel insurance at 18% and vehicle insurance at 17%.
Stevens reiterated that consumers should take time to read their policies carefully and ensure they understand the exclusions and limitations before agreeing to a contract.
New Zealand’s financial dispute resolution limits
In a related development, New Zealand’s financial dispute resolution schemes, including the IFSO Scheme, changed their compensation limits.
Beginning in July 2024, the maximum compensation for financial disputes increased to $500,000 plus GST, up from $350,000. Compensation for non-financial loss, such as emotional stress or inconvenience, also rose to $10,000 plus GST.
This change is part of a government initiative to standardise the rules for financial dispute resolution services and provide consumers with better access to fair and independent dispute resolution.
These updates come as part of the Financial Service Providers (Rules for Approved Dispute Resolution Schemes) Regulations 2024, aimed at improving consumer access to resolution services without needing to go through the courts.
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