Consumer advocate Financial Rights Legal Centre (FRLC) has released a report expressing concern over the data practices of insurers, such as relying on erroneous historical information to assess new claims.

The report, Privacy Practices in General Insurance, found a series of problems including a lack of transparency over the sharing of policyholders’ data.

According to the report, it is often not clear to consumers if they are sharing their personal data with an insurance brand, the company that owns it or a whole ecosystem of interrelated bodies.

The report says a field study found at least one material error in every My Insurance Claims Report document obtained by participants in the FRLC research. The claim reports are provided by the Insurance Reference Service (IRS), the industry’s shared database, for a $22 fee.

Incorrect or misleading claim status descriptions, old claims not being removed, missing claims, incorrect claim descriptions and wrong address are among the errors found.

“The IRS service evidences very poor fit to purpose, lack of clarity about data relevance, meaning, application and use, and unreliability of the processes of input, update and disclosure,” the FRLC report says.

FRLC says the service does not have the appearance of a scheme designed to serve its nominal purposes.

“It appears very likely that, to the extent that insurers place any reliance on IRS, it misleads as much as it informs.

“In its current form, the data provided could be harmful to the interests of a proportion, and perhaps a significant proportion, of claimants against general insurance policies.”

FRLC CEO Karen Cox says the Insurance Council of Australia’s (ICA) recent recommendation that My Insurance Claim Reports should be used by policyholders to assist in satisfying their disclosure requirements should be reconsidered.

“Given their dubious quality, My Insurance Claim Reports should not be relied upon by either insurers or consumers,” she said.

ICA has responded to the FRLC report, saying efforts are underway to improve the IRS.

“IRS and its 16 insurer members are well advanced in a significant data improvement program in 2022 to address IRS data quality and consistency across the 16 insurers that will address many of the points raised in the FRLC report,” a spokesman said.

“The Insurance Council welcomes the Financial Rights Legal Centre’s report, which canvases issues relating to IRS.”

FRLC says the Government should regulate industry-wide reporting of general insurance claims, in the same manner that a scheme has applied to credit reporting since the early 1990s.

It is one of 16 recommendations made by the FRLC. The other proposals include improving the visibility of the availability of insurance claims history reports and offering a workable mechanism for consumers to obtain a reliable claims history.

The FRLC report is the fourth and final instalment of a series of studies looking at the future of insurance ahead of the industry’s inclusion in the Consumer Data Right scheme.

Click here for more from the report.