The General Insurance Code of Practice Governance Committee is scoping a targeted inquiry into travel insurance due to a rising number of declined claims.

The committee says it will also further investigate withdrawn claims in other retail classes.

Code subscribers received 294,218 travel claims last financial year, down 6% from the previous 12 months, but the number declined rose 20% to 34,657, the committee says in its annual report.

“The data on travel insurance in recent years, in particular the rising number of declined claims, has revealed this to be an area of concern,” the report says.

The planned inquiry would include an examination of the effect of different sales channels on customer outcomes.

A “no cover” response – which the committee says is “ambiguous”, is the most common reason given for declining travel claims. More specific reasons cite the policy excess, pre-existing medical conditions or items left unattended.

Consumers and small businesses escalated 3450 travel complaints to stage two of internal processes last year, up 5%, while the number of complaints per 10,000 travel policies was little changed.

Across all retail lines, code subscribers recorded 327,191 withdrawn claims, up 10% on the previous year, with motor and home most affected

The committee says it is concerned data is not providing a complete picture and it wants to conduct an inquiry to better understand the reasons behind the figures, and establish whether insurers’ claims processes are influencing consumers and small businesses to withdraw claims.

Withdrawn motor claims rose 12% to 157,221. For every 1000 claims received 76 were withdrawn, compared to 68 last year.

The committee says code subscribers should review why the withdrawal rate continues to rise, especially as in 81,826 cases consumers or small business have not provided a reason.

Home insurance attracted the highest rate of claim withdrawal for all retail classes, with 147 withdrawn for every 1000 received last financial year, up from 129 in the 12 months previously.

In most cases claims were withdrawn by or with the knowledge of a claimant, who decided not to proceed but didn’t give a reason.

The committee says it’s concerned that some 11,635 claims were withdrawn because the claim was “not covered”, with the reasons including policy exclusions or conditions.

It calls on code signatory companies to “examine why consumers or small businesses withdrew their claims before a formal decision was made to either accept or deny them”.

The committee also queries whether enough is being done to ensure consumers know that claim disputes can be escalated to the Australian Financial Complaints Authority (AFCA) if insurer decisions go against them after internal reviews.

Last financial year only a little over half the complaints which had unfavourable outcomes after stage two of internal complaints processes reached AFCA.

“In addition, the proportion of complaints resolved by AFCA in favour of complainants was much greater compared with outcomes reached by subscribers at the end of stage two,” it says. “The committee would expect to see greater alignment.”

The committee says subscribers must ensure employees responsible for complaint reviews are well trained and competent.

“A critical element of this is using the outcomes of complaints from AFCA to improve these employees’ knowledge and understanding of products, claims processes, general insurance law and principles and applicable consumer protection laws,” it says.