The corporate regulator has demanded insurers act immediately on complaints handling failings, toughening its messaging as the three-year anniversary of the Queensland and northern NSW floods approaches. 

The Australian Securities and Investments Commission released internal dispute resolution (IDR) guide RG 271 in September 2021, setting out enforceable standards, while its Navigating the Storm report on home claims handling last year identified dispute response failings and called on insurers to comply with RG 271 and the industry code of practice.

“Insurers have had plenty of time to make improvements given the IDR obligations began three years ago,” an ASIC spokesman told insuranceNEWS.com.au last week.

“They have been on notice that ASIC expects improvements in how they handle complaints and claims at least since August last year when we released our report on the aftermath of the 2022 Queensland and NSW floods.”

ASIC’s new Cause for Complaint review finds insurers still have “significant blind spots” in areas such as identifying complaints, reporting systemic issues and communicating with policyholders.

Failure to deal fairly and in good faith with customers is an ASIC enforcement priority for next year and encompasses problems with IDR processes.

“We are considering further regulatory action in relation to some of the issues identified in this review,” ASIC says.

The complaints issues are partly a flip side to claims handling problems – which soared amid the flooding disasters of 2022 and the covid pandemic – but are also separate and compound trauma experienced by consumers getting back on their feet after catastrophes.

The Insurance Council of Australia-commissioned Deloitte report on the northern NSW and Queensland floods – known as Cat 221 – found complaint processes were affected by the same issues as claim handling but to a lesser degree, with delays the biggest driver of complaints.

Its recommendations included that onboarding, training and competency frameworks to prepare new hires for claims and complaint handling roles during a catastrophe should be reviewed or established, and that insurers consider providing staff with recognised accreditation or certificate-level training.

Internal dispute handling and links to the Australian Financial Complaints Authority were key topics in the federal parliamentary floods inquiry, which found inconsistent approaches made data often unhelpful or misleading when comparing companies.

It recommended RG 271 should be updated to give more guidance on what constitutes a complaint and how they should be recorded, with an aim to ensure the definition captures appropriately serious disputes and establishes a consistent threshold.

The inquiry proposed insurers create dedicated IDR monitoring and review teams to identify systemic issues and to implement complaints authority feedback, and it called for improved resourcing and training. 

The parliamentary inquiry also recommended insurers facilitate escalation of cases still unresolved after 12 months to an experienced case manager and create a “consumer advocate” role to provide oversight and feedback.

ASIC told the inquiry many issues probably “don’t show up in the data” since consumers may be unaware of their rights or do not know how to put forward a complaint for serious consideration. The floods inquiry report noted individuals should not have to seek assistance or representation to get a fair, timely and effective outcome.

Last week’s ASIC report says there is significant variability between the best and worst performers, and it will give individual written feedback to the 11 insurer participants in its review.

ICA stresses companies have been investing in system improvements, both human and digital, and the sector has been focused on lifting performance – including on complaints handling – in the face of larger, more frequent and more costly events.

“Any case where customer harm has taken place is unacceptable, and where that has occurred, those insurers will be focused on understanding why and how this took place and the system improvements that are needed in the face of these findings,” a spokesperson said.

ICA is considering the ASIC report and the flood inquiry recommendations, which will also feed into the independent review of the code of practice that is under way, but requirements have long been clear.

The ASIC review, covering the period between January 1 2022 – or January 1 last year for data – and March 27 this year, reinforces actions insurers should take “at a minimum”.

“Fair, timely and effective IDR processes that provide a genuine opportunity for redress are a key consumer protection and can produce beneficial outcomes for both consumers and firms,” the review says. “A positive complaints management culture is imperative to achieve these outcomes – one that takes a proactive approach in identifying a ‘complaint’, and that does not compound or further delay the recovery of customers and businesses from distressing events.”