Brought to you by:
CGU
CGU

Insurance complaints top 16,000: AFCA

Facebook Twitter LinkedIn Google

The Australian Financial Complaints Authority (AFCA) received 16,912 general insurance disputes in the last financial year, with comprehensive motor dominating the proportion of cases lodged.

Similar to the preceding period, general insurance contributed to 24% of complaints received, according to an annual update from AFCA.

Banking and finance again accounted for the largest share of cases lodged, at 60% in the 2020/21 financial year.

The external dispute resolution body did not provide a breakdown by sector but says more than $240.5 million in overall compensation and refunds was given through the resolution process in 2020/21 to consumers and small businesses.

It says many complaints were resolved in favour of the financial firm.

AFCA says overall complaints are 12% lower than the preceding 2019/20 year, a period that also included the initial months of the pandemic and a spike in travel insurance disputes.

About 8303 COVID-related complaints were submitted during the 12 months to June 30, compared to 5013 over the four months at the end of the previous financial year after the pandemic was officially declared.

AFCA says the past 12 months included 165 complaints related to insurance cover held by small businesses for business interruption associated with COVID-19.

More complaints are expected in the coming year, once the second of two test cases brought by the insurance industry is resolved, it said.

“The aim of second test case is to provide guidance on common ‘trigger’ clauses, including those that relate to the effect of government orders restricting access on small business operations and the proximity of a disease outbreak to a small business,” AFCA said.

“The second test case is expected to conclude by the end of 2021.”

AFCA says general insurers received the highest number of general insurance complaints (13,732), followed by complaints against underwriting agencies (2100).

The five leading insurance complaints received by issue are claim amount (3161), denial of claim - exclusion/condition (3146), delay in claim handling (3126), denial of claim (2479) and service quality (1164).

By product, comprehensive motor vehicle tops the list with 4386, followed by home building (3527), travel (2477), home contents (1079) and motor vehicle - uninsured third party (934).

In relation to COVID, travel and business interruption were the most common insurance complaints although the former saw a 22% decline due to the national border closures.

AFCA says it has been active in its engagement with both industry and consumer groups in tackling some important emerging issues in insurance.

It also continues to partner with the Insurance Council of Australia, industry and consumer groups in responding to the impact of natural disasters and the pandemic.

Consumer Action Law Centre Policy Officer Tom Abourizk says the latest general insurance dispute numbers “hopefully indicates that insurers are doing more to provide satisfactory outcomes for consumers through internal dispute resolution processes”.

“However, with nearly half the complaints reaching AFCA still being resolved at the initial registration stage, it appears that many of these complaints could be resolved internally, and consumers should not have had to go to AFCA,” he told insuranceNEWS.com.au.

“It is also concerning that the number of disputes involving motor vehicle insurance continued to increase in a year where significant portions of the population were locked down and presumably using vehicles less.”

Click here for the AFCA general insurance overview and here for the Datcube for details by insurance provider.