Insurance Council responds to AFCA complaints surge

An AFCA media release said complaints about delays in claims handling were a “key issue” in home building, home contents and motor vehicle insurance disputes.

“Notwithstanding this, we are concerned at the rise in complaints being escalated to AFCA,” said David Locke, AFCA’s chief ombudsman. “We want to better understand the causes of complaints and we’re eager to work with insurers to help them resolve disputes more quickly and, ultimately, to prevent them.”

Read more: AFCA sees dramatic rise in complaints against insurers in FY21-22

In response to questions from Insurance Business, the Insurance Council of Australia (ICA) supported AFCA’s eagerness for collaboration and suggested claims handling times can be an issue.

“The Insurance Council and insurers continue to collaborate closely with AFCA through in-person and online community forums and to gain insights into opportunities for enhanced and quicker complaints resolution,” said an ICA spokesperson.

However, the spokesperson added that insurers are working hard to resolve claims as quickly as possible “and have put on 100s of extra staff to support claims processing.”

According to the AFCA media release, Locke said “a sharp rise in complaints about general insurance” had occurred during a period that included an earthquake in Victoria last September followed by catastrophic storms and flooding across the country into the early months of this year.

“We acknowledge that insurers face challenges as they try to manage claims and get people back on their feet,” he said. “We know there are significant issues with the supply of things like building materials, parts and labour because of national and global events outside their control,” he added.

The ICA spokesperson said the east coast floods alone “have so far amounted to more than 225,000 claims being lodged, costing an estimated $4.83 billion in insured damages.”

“The insurance industry continues to support the recovery of affected property owners and communities from the widespread destruction of extreme weather events of the past year,” added the spokesperson.

The AFCA release said Locke was “pleased” that, overall, half of all the complaints that reached AFCA were “resolved quickly”. Almost 70% of complaints were resolved after an agreement was reached between the parties.

Slow claims processes are often seen as an insurance industry weak spot, especially during natural disasters.

Earlier this month, Stephen Browne, vice president and country manager of Xceedance, told IB that he saw an AFCA presentation in early June where the statistics clearly showed a big rise in consumer complaints around claim processing delays.

By the end of May, he said, the AFCA data showed that the number of those complaints was already 88% higher than the 2021 total.

Read next: AFCA could order insurers to pay COVID-19 BI insurance claimants $500,000 each

Browne, whose firm specialises in strategic consulting and technology services for insurance companies, said insurers need to refocus on claims innovation.

“Slow claims processing and service quality are both issues that can be resolved with technological innovation,” he said. “You can speed most elements of the claim lifecycle, from lodgement, liability assessment, and supply chain management through to payments, subrogation, recoveries, and settlement through automation or improved processes.”

EXL, a global data analytics and digital operations and solutions company believes Australian insurers need to accelerate a data led digital transformation. One of the firm’s offerings helps insurers automate the end-to-end quality process in their claims operations.

Other tech experts suggest low code is a way of improving claims processes.

“Instead of relying on expensive core modernization initiatives or ‘rip and replace’ scenarios, insurers can leverage technology like low-code to unify their existing systems without data migration,” said Luke Thomas, Asia-Pacific vice president at Appian, the technology company headquartered in the United States.

“The beauty of low-code is there is less need for developers and IT teams to be involved in the development of an app or system and those that are going to actually use it can be involved in designing it,” said Thomas. This eliminates many of the challenges of IT modernisation projects, he said.

According to its own figures, since starting operation in 2018, AFCA has registered more than 270,000 complaints and helped Australian consumers receive more than $820 million in compensation from companies, including insurance firms.