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AFCA's candid self-reflection as review concludes

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With just weeks now to wait for the report from an independent review of its operations by Treasury, the tone of Australian Financial Complaints Authority (AFCA) ombudsmen at a two-day member forum last week was conciliatory and amenable.

The review’s report is due to be presented to the Minister on August 13, before being tabled in Parliament within 15 sitting days.

It’s the first scorecard of the insurance industry’s claim dispute “referee” since AFCA – the final decider of dispute outcomes for 40,000 member firms across the broad suite of financial products and services – commenced operation in November 2018.

“AFCA accepts there is much more to do,” Deputy Chief Ombudsman June Smith told a Plenary session on Thursday which attracted about 700 attendees.

“After two-and-a-half years in operation, we are very proud of the work we have done but we know we can improve our service to deliver consistent, timely and fair dispute resolution and to improve member and consumer experience.”

Dr Smith acknowledged timeliness was “a key aspect of a fair process,” that delay leads to a negative experience and there was “work to do here”.

“We are engaging in a series of efficiency and procedural initiatives to deliver greater timeliness in our work,” she said.

“Timeliness is a key part of fairness and we understand the feedback that this is important to you.

“We understand that parties to a complaint in the 21st century want the answer to issues today and not in 12 months’ time, and we know there is work to do here.”

AFCA COO Justin Untersteiner presented alongside Dr Smith during the Plenary, and members then tuned in for a General Insurance session with ombudsmen Chris Liamos and Helen Moye on Friday, followed by a Life Insurance session by Andrew Weinmann.

There was an abundance of statistics.

One that particularly caught the ear of AFCA’s members was that while AFCA has awarded more than $600 million in compensation to date, more than half of complaints that go to determination are found in favour of the financial firm and no compensation is paid.

This insight impressed attendees, one commenting in the chat box: “Good to hear June mention how many complaints are resolved in favour of a financial firm. This was missing from AFCA's media release in June.”

Also illuminating were details of a just-concluded pilot program by AFCA addressing potential “gaming” of the system and concerns insurers (and sometimes brokers) pay disproportionately high costs in some low-value matters as a result.

“We have heard this feedback and we are taking action. We are taking it seriously,” Mr Untersteiner said.

In the three-month pilot, which trialled AFCA declining some complaints where it found compelling reasons, 120 complaints were identified for review because there was no financial loss or no error.

Of those, 106 were closed without action.

“The balancing act here is to ensure that we are not closing complaints that do have merit – sometimes the only way to determine this is through a full investigation,” Mr Untersteiner said, adding that AFCA hopes to make the change a permanent feature of its system.

Insurance attendees heard Dr Smith offer some praise as the sector prepares for a possible rush of claims and complaints from small business.

“I just want to call out to the general insurance industry our thanks for the proactive way they have communicated with small business members and business in relation to business interruption insurance,” Dr Smith said.

It will be vital for AFCA and general insurers to ensure that they are ready to handle the “many business claims and complaints we may see” when a second Federal Court test case is finalised, she said.

AFCA will hold public consultation on BI insurance this year and promises that there will be plenty of opportunities for members to engage.

AFCA manages 70,000-plus cases each year and publishes more than 5000 decisions.

In general insurance, there were 16,912 complaints in the year to June 30, with 4386 related to comprehensive motor, 3527 home building, 2477 travel, 1079 home contents and 934 uninsured third party motor.

The top five general insurance complaints by issue were claim amount, claim denial due to exclusion condition, delay in claim handling, denial of claim, service quality.

More than $71.1 million in compensation to general insurance customers was awarded by AFCA, with 69% of complaints resolved by agreement or in favour of the complainant. The average time to close a complaint was 88 days (compared to 124 days in Life Insurance).

On the referee’s broader scoreboard across all financial services to date: AFCA has resolved the “overwhelming majority” of nearly 200,000 complaints received since its formation.

It handles half of complaints within an average of 31 days, while 71% are resolved within 90 days and 92% are handled within 180 days.

The average time to finalise a complaint is 74 days. There are 1489 cases of over 365 days duration.

AFCA is working hard to score even higher, with new specialist teams, strengthened workflow mechanisms, enhanced exception reporting, aged file prioritisation, new timeliness performance records and better communication to inform parties about progress.

Firms can also expect AFCA to more actively manage the number and exchange of submissions between the parties and the granting of extensions of time, Dr Smith says.

In general insurance, the BI test case, legislative changes, premium disputes, natural disaster and stakeholder engagement are AFCA’s medium-term focus.

Next month, AFCA will run a webinar on a new Regulatory Guide 271, effective October 5, which outlines how financial firms must deal with complaints under Internal Dispute Resolution (IDR).

AFCA has also developed a new Engagement Charter which takes effect next month and enshrines an expectation all parties cooperate reasonably to bring finality to a complaint.

“Procedural fairness is undermined by behaviour that causes inefficiency and delay,” Dr Smith said, adding that AFCA can, at its discretion, stop engaging with a party in exceptional circumstances.

AFCA and its members will await the Treasury review report with interest, but that won’t stop it pushing ahead on improvements in the meantime.