Life insurers have raised concerns with an Australian Financial Complaints Authority (AFCA) proposal to make a rule change in relation to settlement offers. 

Insurers voiced their doubts over the proposed measure in a submission to AFCA. The ombudsman had consulted on the proposal and other planned changes after the 2021 Treasury independent review of the complaints scheme. 

AFCA says in the consultation paper its rules currently give the ombudsman the ability to exclude a complaint where the complainant has been appropriately compensated for their loss. 

But the rules do not include a specific provision which provides AFCA with discretion to exclude a complaint where a complainant has failed to accept an appropriate settlement offer from the financial firm. 

“We consider this conduct is not in keeping with fair, timely and efficient dispute resolution,” AFCA says. 

The ombudsman says its proposed rule change is aimed at encouraging fair settlement of meritorious complaints at an early stage in AFCA’s process. 

The Council of Life Insurers (CALI) says the proposed change appears to be an attempt to respond to Recommendation 1 in the Treasury review, which says AFCA should provide “clearer guidance on the circumstances under which a further issue identified during the complaint process would revert to financial firms for consideration through internal dispute resolution”. 

It says AFCA’s proposed change only addresses the circumstance of when complainants seek to add new issues which have already been appropriately settled by financial firms, or for which there has been an appropriate offer to compensate. 

“CALI is therefore concerned that there is no current proposal to address how AFCA will provide clearer guidance on the entire spectrum of circumstances where Recommendation 1 was intended to apply,” the peak body says. 

CALI in its submission also touched on proposed changes in relation to circumstances where unreasonable conduct is directed at AFCA staff by a complainant or their paid representative. 

The peak body supports the changes but points out the draft proposal does not protect financial firms’ staff from inappropriate behaviour by complainants and paid representatives. 

“CALI believes it is preferable to adopt a consistent approach towards responding to unreasonable complainant conduct when these complainants subsequently lodge their complaints with AFCA,” the submission says.