General insurance complaints surged 50% to 27,924 in the past year, and claim delays were the top cause of disputes escalated to the Australian Financial Complaints Authority (AFCA).

AFCA says 10,996 complaints about delays in claim handling (including general and life insurance) were lodged, up 76% from a year earlier and the number one issue amongst a record 96,987 complaints in the past 12 months across all financial services.

The total also includes 6266 insurance claim amount complaints – a rise of 42% for that issue from a year earlier – and 4851 about claim denial due to exclusions, a rise of 51% for that issue.

AFCA Chief Ombudsman and CEO David Locke says the figures reflect insurer claims handling issues that have continued for well over a year. He is urging insurers to “take the necessary steps” to ensure fewer policyholders have to take a complaint to AFCA.

“It is disappointing that this continues to be a concern. While we acknowledge the challenges insurers have faced, the bulk of complaints in the past year were not about natural disasters but about regular claims,” Mr Locke said.

General insurance complaints about claim delays were up 66% at 7953, though only 912 were associated with natural disasters, including 622 related to the early 2022 record floods in Queensland and NSW. 

“We are deeply concerned by the volume of complaints consumers are having to escalate to AFCA. It’s not fair on consumers and not good for business. We need to see a significant improvement from firms,” Mr Locke said.

The Insurance Council of Australia (ICA) told insuranceNEWS.com.au today it is aware of some delays in claims processing after it declared three insurance catastrophe events in 2022.

"It must be noted the significant pressure last year’s floods put on insurers’ systems and processes, which are used to respond to all insurance claims, as well as a shortage of experts required to assess and manage claims and building and labour supply constraints,” a spokesperson said. 

“Insurers work hard to look after customers and to finalise claims as quickly as possible, but they are also required to complete all necessary reports to make an informed claims decision,” the ICA said, noting AFCA data shows 70% of disputes that progressed to determination last financial year were found in favour of insurers. 

The ICA says insurers’ response timeframes, resources deployed, claims handling, complaints handling, communication with policyholders, and engagement with stakeholders will all be examined as part of an independent review, which is expected to be completed in October.

The AFCA insurance figures compare with a 27% rise to 53,638 in banking and finance complaints.

AFCA says it is “working with insurers to try to ensure fewer people have to take the extra step of bringing a complaint to AFCA”.

Among the top products complained about was vehicle insurance, with 8296 complaints – up 43%. Life insurance complaints totalled 1898, down by a quarter from a year earlier, though delays in insurance claim handling was a significant issue in superannuation, rising 136%, including about payment of death benefits.

“We urge fund trustees to closely track the progress of claims and to review outcomes for members. Access to this money is vital for people who have lost a loved one or are unable to work. Unnecessary delays and poor communication are distressing,” AFCA said.

Consumer groups urged insurers to boost their resources to address the issue.

“These companies have been largely immune from the cost-of-living crisis and are still making handsome profits,” Consumer Action CEO Stephanie Tonkin said. 

“There is no excuse for leaving customers who have endured natural disasters and suffered damage to their homes or cars in limbo.”

Insurers have "inadequately” resourced their claims handling departments to deal with the increased rates of claims from extreme weather events, she says.

Choice CEO Alan Kirkland says financial institutions aren’t doing enough to help consumers as cost of living pressures worsen, and more people are at risk of falling into financial hardship.

“Some people are being forced to wait for money they need following a crisis. Insurers need to invest more in claims handling and customer service, to ensure claims are processed efficiently and fairly,” he said.

AFCA says 86,185 complaints have been closed, taking 69 days on average, with only 5% progressing to a formal determination and 71% resolved by agreement between the firm and consumer, up from 67% the previous year. 

“These improvements are pleasing,” AFCA said. “It’s efficient and cost-effective for firms and it takes away anxiety and uncertainty for complainants.”

March clocked up a monthly record of 11,249 complaints, or 363 complaints a day. Total compensation and refunds secured by consumers rose 22% to $253.81 million, and firms also remediated more than 378,000 people $100.5 million in refunds. 

More detailed, segmented 2022/23 complaints data will be available in coming months.