Complaints about general insurance are rocketing up and there’s no end in sight unless the industry “does a better job”, Australian Financial Complaints Authority (AFCA) member businesses have been told.

The authority urged companies to up their efforts on internal dispute resolution at member forums held at the end of last month.

Chief Ombudsman and CEO David Locke says AFCA’s free-for-consumers service is meant to be an alternative to the courts, and it should be handling “intractable disputes which need independent mediation and decision-making”.

Instead, it is being swamped by complaints about communication, delays or poor complaint and dispute handling.

“Unless industry does a better job, consumers will continue to be so frustrated that they escalate matters to us because they feel they have no alternative,” he said.

Members heard that last year AFCA received 28,698 general insurance complaints, up 20% on 2022. The top five issues were: delay in claim handling (7405); claim amount (5802); denial of claim – exclusion/condition (3919); denial of claim (3747); and service quality (1756).

The average time to close a complaint went up 10 days to 91 days, with 2% of complaints taking longer than a year to resolve.

“At first, we monitored complaint volumes to understand if such growth was an aberration or if we were entering a ‘new normal’ for [external dispute resolution],” Mr Locke said.

“After more than 18 months of consistently high numbers, it’s evident this growth is sustained – and something we must all act on to address.”

He says such volumes have “of course” put pressure on AFCA’s service, but he’d rather members invest more in internal dispute resolution “and resolve these complaints fairly at source” than AFCA continue to expand and pass increased costs to members.

Lead Ombudsman Insurance Emma Curtis says she is still seeing “ongoing increases” in complaints, which don’t just relate to natural catastrophes.

“We’re seeing elevated complaint rates across the range of general insurance products and issues,” she said. “This isn’t a good position for insurers or for their customers.”

She encourages insurers to resolve disputes at an early stage where possible, and keep communicating with customers.

“While insurers may not be able to deal with the underlying reason for [a claim delay], I think effective and regular communication can really help to reduce complaints in this area.”

Ms Curtis says AFCA has acted to deal with delays in its own service.

A pilot project is fast-tracking simple complaints, and communication is prioritised to give complainants an idea of likely time frames. 

Extra ombudsmen, adjudicators and panel members have been recruited, and complaints are batched where possible and sent to decision-makers with relevant expertise.

After record-breaking natural disasters, AFCA’s profile has grown, but Ms Curtis does not believe increased public awareness is the cause of spiralling complaint numbers.

She says tests show communities are still not as aware of the dispute regulator as they should be.

“We want to be open and accessible. We do think it’s important that people know about us. Complaints are not being driven so much by awareness of AFCA but by dissatisfaction with what’s happened to them during their interactions with their financial firm.”

Ms Curtis says some members have made “encouraging” improvements to resourcing, systems and processes.

And Mr Locke agrees that “some of the larger insurers” have taken important steps.

But it’s not consistent, and more is needed.

“We do think there is scope for complaints to be reduced,” Ms Curtis said. “We have seen that in life insurance, so we know it’s possible. There is an opportunity for service standards to be improved, communication to be improved, and for value to be provided to the consumer in such a way that it does drive reduced complaints.”

Click here to listen to the member forums in full.