The Australian Securities and Investments Commission (ASIC) has launched consultation on new standards for the handling of customer complaints by financial firms.

Hayne royal commission hearings highlighted a number of issues with complaints handling, including in the general insurance industry.

ASIC's own research also revealed a number of shortcomings, and the regulator says its proposed new standards will improve transparency and the way complaints are dealt with.

Financial firms would be required by ASIC to meet the new standards when they deal with complaints through their Internal Dispute Resolution (IDR) arrangements.

The proposals include:

• Reducing maximum timeframes for IDR responses

• Setting clear standards about what should be in written reasons for decisions

• Strengthening the requirement that firms take a systemic focus to complaints handling

• A new framework for recurrent complaints data reporting to ASIC

“It is widely acknowledged there is room for much improvement when it comes to handling consumer complaints in our financial system,” ASIC Deputy Chairman Karen Chester said.

“Consumers expect and need a fair, timely and effective way to have their complaints dealt with, and to be provided redress where appropriate.

“Firm performance in how they handle customer complaints, and their interaction with the Australian Financial Complaints Authority (AFCA), will increasingly be in plain sight.

“This greater transparency will inform consumer and broader public understanding of how well firms treat their customers."

The absence of “effective redress” and the failure of firms to identify and look into systemic complaints, were key findings of the Hayne royal commission, she said.

Choice CEO Alan Kirkland welcomed the proposals.

“Financial firms need to be much better at resolving complaints when they are first made, and this needs to be firmly regulated by ASIC,” he said.

“By requiring financial firms to provide data on their internal dispute resolution, ASIC will be better equipped to monitor and regulate poor performance.

“Publishing this information will mean that consumers can make decisions about where to take their banking or insurance, based on how well firms are treating their customers.

“This should drive better dispute resolution at the first instance, so that less people have to go to AFCA or, even worse, the courts.

“Self regulation of internal dispute resolution has clearly failed, so we welcome the proposal to introduce a formal legal requirement for firms to comply with dispute resolution processes.”

ASIC aims to release new IDR standards in a regulatory guide by the end of this year. A separate consultation on the publication of IDR data will start early next year.

Click here to respond to the consultation documents before August 9.