Insurers must improve training and monitoring of external experts and ensure they only provide factual evidence based on their areas of knowledge, the Code Governance Committee says following an inquiry. 

The committee’s probe revealed external assessors providing opinion outside their scope of expertise, potentially leading to poor claims decisions, disputes and complaints, chair Veronique Ingram said today. 

It also found training lacks formal evaluations, and gaps exist in monitoring and oversight, with quality assurance processes too often prioritising cost and time efficiency over quality of work. 

“While efficiency is important, it should not come at the expense of quality,” Ms Ingram said. “We expect that insurers’ quality assurance processes are comprehensive and incentivise work of the highest standards from external experts.” 

The inquiry – which followed up issues identified in a report on home claim denial complaints – evaluated the practices of six insurers. 

Issues with expert reports have also been raised in the parliamentary inquiry into the 2022 floods and through the Australian Financial Complaints Authority. 

Ms Ingram says the Code Governance Committee was pleased to see the Insurance Council of Australia recently publish updated guidance and a written standard to encourage better practices when using external experts. 

“The new guidance and standards from ICA demonstrate a real push for better use of external experts in the industry,” she said. “When insurers read these publications in combination with the recommendations in our report, they will have a clear view of the expectations for use of external experts.” 

The ICA standard says insurers should disregard any statements or opinions that are outside the report’s scope or the expert’s area of expertise. 

It gives as examples experts opining on whether a claim should be accepted or denied, or a hydrologist expressing views within the realm of a builder. 

The standard says reports should include “clear and cogent reasoning supporting the opinion” and have a statement of objectivity. ICA has also produced a fact sheet for policyholders. 

The Financial Rights Legal Centre today supported the Code Governance Committee’s call for improved oversight and quality assurance. 

“We regularly field calls on the Insurance Law Service from consumers who have been provided with poor-quality reports, including those with little evidence provided to support conclusions made, incorrect interpretations of standards, and inconclusive findings, among a whole range of issues,” senior policy and advocacy officer Drew MacRae said.

“While insurers have taken some recent steps to lift standards, there is a lot more work to do to manage conflicts of interest, lift training standards – particularly with respect to recognising and addressing consumers experiencing forms of vulnerability – and building systems to oversee the work of third parties.”

Financial Counselling Victoria, in a report released yesterday, has proposed strengthening the independence of expert reports with a requirement that insurers commission them through a body such as the Australian Financial Complaints Authority or the Australian Securities and Investments Commission.

The Code Governance Committee says it will follow up with insurers to ensure they consider and implement its recommendations and make necessary improvements.

See the code committee’s report here.

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