The Australian Financial Complaints Authority (AFCA) has told the parliamentary flood inquiry that insurers have “a lot of room for improvement” in complaints handling, and more disputes should be resolved earlier.  

The authority’s COO Justin Untersteiner told yesterday’s House of Representatives Standing Committee on Economics hearing that the sharp rise in insurance complaints, with more than 30,000 recorded for the 2022-23 financial year, raised issues over insurers’ ability to “efficiently and fairly deal with claims when major events occur”.  

“We saw many complaints that should have been resolved in-house, but which came to us because the insurer’s dispute resolution teams were just too busy,” Mr Untersteiner said.  

“It was a signal that things were not working for large numbers of customers as they interacted with their insurers. 

“Also causing us concern was the sheer volume of complaints that were not about catastrophes or significant weather events, but about ‘business as usual’ insurance matters.”  

Mr Untersteiner highlighted the “two Ds” – delay and denial – as key issues driving complaints, with 36% of complaints relating to communication and delay errors.  

“We saw too much evidence that communication from insurers was poor. Consumers often had no way of receiving updates, and didn’t know what was going on,” he said.  

“Often the problem wasn’t even the delay itself – it was the void in information, in addition to the missing of promised dates. Again, we think this is, and should be, fixable.”  

The authority says insurers need to put more resource and effort into supporting internal dispute resolution teams, noting that a previous General Insurance Code Governance Committee report found that half of denied home claims that were complained about were overturned in consumers’ favour.   

“To me, that is completely systemic,” Mr Untersteiner said. “That points to cultural challenges and maybe deliberate decisions.” 

Mr Untersteiner expressed frustration that insurers are “essentially outsourcing their IDR to us” and questioned attempts to shift the onus of proof onto complainants. He also identified “major concerns” about insurer non-response rates to AFCA, which rose to 21% in 2022.

The authority acknowledged that the industry has made promising efforts towards rectifying identified issues and added that policy standardisation would be “of benefit”. 

“It helps if we have consistent definitions across the sector and it helps consumers compare between different products because they don’t have to compare the different definitions when comparing products,” AFCA Lead Insurance Ombudsman Emma Curtis said.

Mr Untersteiner said in his opening statement that insurers must examine complaints to "seek to understand what is really driving these disputes". 

"We believe they should ask themselves hard questions about whether, or how, their products, sales practices and claims handling practices need to change," he said.

The inquiry will continue tomorrow with the General Insurance Code Governance Committee appearing at 9.15am and Munich Re from 11am.