The Australian Securities and Investments Commission (ASIC) has set out a three-point action plan for insurers to consider taking after its research found gaps in the handling of claims for the Canberra hailstorm catastrophe in January and last year’s Townsville flood disaster.

While customers were more satisfied than dissatisfied with the claims process in the aftermath of the two disasters, the research identified common sources of unhappiness, despite the differences in research methodology, consumer groups researched, location of consumers and subject matter.

The research found many policyholders were not aware of limitations in their insurance cover; a significant minority felt they were given insufficient information about the claims process and the assessment and progress of their claim; and a key source of dissatisfaction was the number of claims staff that consumers had to deal with during the claims process.

ASIC says its proposed measures will help the industry to prepare for this summer’s natural disaster season, where bushfire is not the only risk facing households and businesses. The active La Nina weather pattern has increased the likelihood of cyclones and above-normal floods in at-risk areas.

The regulator says the action plan will ensure the industry is better placed to meet its “duty of utmost good faith” as is required when it comes to claims handling.

The proposed plan calls on insurers to centralise oversight of a claim with a dedicated claims manager from the time it is lodged until it is resolved; and to proactively and effectively communicate with claimants about the claims process, how their claims will be assessed and how their claims are progressing.

The final part of the plan says with new design and distribution laws coming into effect on October 5 next year, insurers should consider if their offerings are designed to meet the needs of consumers living in areas prone to natural disasters. They should also reassess if these offerings are distributed in a way that results in appropriate products being sold to those consumers.

“We expect that you will seek ongoing confirmation, through board reporting, that your company has considered and appropriately responded to our identified actions,” Senior Executive Leader - Insurers Emma Curtis said in her letter to insurers.

“Your company should also consider these identified actions when assessing its readiness for the commencement of the design and distribution obligations and the regulation of claims handling as a financial service.”

In its research of the Townsville flood claims handling experience, 31% of the 251 small businesses who were interviewed say they were “very dissatisfied” with the number of people they had to deal with in making a claim. Around 30% felt the same way with how they were kept informed about the progress of their claim.

Key sources of dissatisfaction in relation to claims on business interruption insurance were disagreements about how the loss was calculated, and the excessive amount of information that claimants dealing with a crisis felt they were required to provide.

While 88% had business insurance at the time of the flood, 37% of them were not covered for flood despite the region’s well-documented exposure to the risk. Almost one in 10 of the small business insurance policyholders surveyed mistakenly believed they were covered for flood, when they were not. Of this minority who mistakenly believed they were covered for flood, 71% arranged their insurance cover through a broker.

For the Canberra hailstorm catastrophe, 100 home or motor policyholders who had made or considered making a claim were interviewed. Some 10% of those who eventually lodged claims were “extremely dissatisfied” with the number of claims staff they had to go through and 15% felt similar with the information they were provided about the claims process.

Many survey participants were frustrated by the inefficiency of waiting on hold on the general claims telephone line, and having to repeat their case history to different claims staff.

Consumers also felt that insurers were not proactive in sharing information about next steps, expectations and their legal rights, which could lead claimants to make less favourable decisions about their claim, ASIC said.

“In many cases, the assessor’s report was not shared with claimants, giving them no option except to trust that the insurer’s settlement offer was fair and accurate,” the regulator said.

Click here for the letter and research findings.