Insurer code breaches hit record levels

Insurance providers breached the General Insurance Code of Practice a record 58,104 times in the 12 months to June 30 2022 – up 40% on the previous year.

The Code Governance Committee acknowledges in a new report that it had been a difficult year for insurers, with a number of large claim events including last February’s record-breaking flood catastrophe across NSW and Queensland.

But it says such a large number of breaches is “disappointing” and that insurers need to adjust their business models to the new normal of increased severity and frequency of natural disasters.

Chair of the Code Governance Committee Veronique Ingram called for improvement after its latest Annual Data Report was published.

“Seeing breaches rise close to 60,000 is disappointing for us and should be disappointing for all in the industry too,” Ms Ingram said.

“We know that there were challenges across the year with the floods in Queensland and NSW causing an increase in claims and putting pressure on insurers, but we’ve seen breaches rise now for five years.

“And claims handling is always the source of most breaches.”

The report reveals that many breaches relate to updating people about their claims within set time frames.

The obligation “we will tell you about the progress of your claim at least every 20 business days” was breached 17,661 times.

“Insurers should be able to provide clients with updates in a timely manner,” Ms Ingram said.

“These are long-standing obligations that should be standard in all processes insurers have for handling claims.

“We should not be seeing breaches of this nature in such large numbers – insurers must make the effort to get on top of these.”

Some 24,983 breaches were attributed to staff not following processes and procedures.

“Insurers must recognise that good systems and processes, properly integrated, will help to prevent or mitigate mistakes in the busy times, the times of high pressure,” Ms Ingram said.

“It is crucial that all insurers look at their current systems and processes and identify areas that aren’t working as well as they could.

“It is time to reverse the trend and see improvements that will bring down breaches in the next 12 months.”

The Code Governance Committee is an independent body that monitors and enforces insurers’ compliance with the Code of Practice.

A spokesperson for the Insurance Council of Australia says insurers will review the report “to build its findings into efforts to further improve performance and customer outcomes”.

“While the reported 40% increase in code breaches on the previous 12 months is concerning, the industry has invested significantly to improve breach identification, recording and reporting,” the spokesperson said.

“The report acknowledges that for the period under review there was a dramatic increase in the number of claims lodged from extreme weather events in Queensland and NSW.”