The General Insurance Code Governance Committee has released its latest statistics – and breaches have soared. insuranceNEWS.com.au has delved into the 38-page data and compliance report, which covers last financial year, to pull out the key trends.

Breaches are up, again

This time last year breaches hit a record 58,104, and a disappointed committee called on insurers to “reverse the trend” of significant rises.

It didn’t happen. The number of breaches soared another 34% to 77,886.

The committee puts the “concerning increases” down to inadequate resourcing, insufficient training and development, and underinvestment in technology.

Claims pain

More than half of all breaches – 45,331 – relate to claims handling, and this figure is up 16% on the year before.

“It is troubling that we saw such significant numbers of breaches in this reporting period,” committee Chair Veronique Ingram said.

Insurers admitted that 13% of the total workforce did not receive training on the code and its obligations.

Failure to communicate

The most breached obligation was paragraph 70 of the code, which states: “We will tell you about the progress of your claim at least every 20 business days.”

A staggering 28,189 breaches related to this obligation. Three years ago, there were just 5723.

“By subscribing to the code, insurers commit to keep consumers adequately informed about the progress of their claims,” the report says. 

“It is reasonable for consumers to expect proactive communication from their insurers about the status of their claims; they do not expect to have to initiate contact themselves to receive updates and information.”

Five insurers were responsible for 92% of the breaches of paragraph 70.

Soaring complaints

Insurers received almost 1.18 million complaints, up 61% compared with the previous reporting period.

More than half (567,406) were about buying insurance, with insurers pointing to grievances regarding premium increases. 

“To reduce such complaints, insurers should provide a transparent breakdown of the components of the premium, so it is clear to consumers why their insurance premiums are increasing,” the report says.

“Another contributing factor is the increased awareness of consumers of their rights to challenge organisations, including insurers, with consumers utilising various channels, including social media, to voice their concerns.” 

Complaints handling

Breaches of the code’s complaints handling obligations rose 82%, reaching an all-time high of 17,238.

“This increase at the industry level was largely driven by a small cohort of five insurers, which accounted for 79% of complaints handling breaches for the year,” the report says.

The top three complaints handling obligations breached were: keeping consumers informed about their complaint every 10 business days; acknowledging a complaint when received; and making a decision about the complaint within 30 days.

“The increase in breaches of the obligation to acknowledge a consumer’s complaint upon receipt is particularly concerning,” the report adds. “Failing to acknowledge complaints undermines consumer trust in the complaints resolution process and risks further disillusionment with insurers.”

Causes of breaches

“Processes and procedures not followed” was by far the leading cause of breaches, accounting for 44,877.

“Administrative error” was next on 9515, followed by “too few staff” (7184), “poor processes and procedures” (6451), and “systems failure” (3655).

On brand

The committee wants to understand whether consumer outcomes differ across brands, even if they’re underwritten by the same insurer.

Of the 49 insurers that subscribe to the code, 31 reported operating under retail brand names. These are usually proprietary brands (owned by the insurer) or distributor brands (owned by another company that sells products underwritten by the insurer – often called “white labelling”.)

A distributor brand of one insurer had “significantly higher” numbers of home and motor complaints, and another insurer’s distributor brand for home insurance “reported notably higher percentages of claims declined and withdrawn compared to its proprietary brands”.

The committee asked insurers to provide a breakdown of complaints and breaches by brand, but not all responded adequately.

“It was disappointing to see that some insurers were unable to provide the information we requested in full, including some of the larger insurers by market share.” 

Impact of breaches

Some 185,796 consumers were affected by breaches during the 2022-23 financial year, with the financial impact totalling almost $2.14 million.

This compares with 689,002 consumers impacted the previous year, at a cost of $1.47 million.

It’s not all bad

Breaches of some obligations have dropped, and the committee says it has seen “encouraging signs of progress”.

Breaches of paragraph 78 – “once we have all relevant information and have completed all enquiries, we will decide whether to accept or deny your claim and tell you of our decision within 10 business days” – dropped 39% to 4788. Breaches around making information available on consumers’ rights to make complaints fell 81% to 51.

Still no sanctions

The committee has powers to name and shame companies that breach the code, or impose a community benefit payment of up to $100,000.

These powers have yet to be used, but the report suggests they may be if improvements are not made around claims and complaints.

“Where we identify significant or sustained non-compliance, especially where there is no adequate plan or commitment to improve, we will take further action, including issuing sanctions where appropriate.”

Watch this space.

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