Disputes over flood claims handled by the Financial Ombudsman Service (FOS) in 2012/13 have fallen, thanks to the industry adopting universal flood cover.

Chief Ombudsman Shane Tregillis says in the latest annual review, issued last week, that the reduction in natural disaster disputes is due to “a much higher prevalence of flood cover following recent legislative changes and the efforts by the insurance industry to improve practices in this area”.

FOS handles disputes related to general and life insurance, banking and financial services.

The review shows around 50% of all disputes it accepts are about credit products, with disputes about home loans and credit cards the most common in the past year.

Overall the service received 32,307 disputes in 2012/13, down 11% overall from the previous year. The number of disputes that it accepted fell 5% to 24,100 disputes.

General insurance disputes comprise about 30% of FOS business. The number of disputes accepted in the reporting period totalled 7581, compared with 7595 in 2011/12 and 5627 in 2010/11.

General Insurance Ombudsman John Price says the industry is “getting better” at handling natural disaster disputes.

“There has been a lot of concentration in the companies to develop processes to deal with natural disasters,” he told insuranceNEWS.com.au. “We’ve had six years of increase in natural disaster events, so the industry has had plenty of practice.

“As a result they’re getting better at dealing with them.” 

Some 93% of the disputes accepted for resolution in 2012/13 related to domestic insurance, with 67% of all disputes related to insurers’ declinature of claims.

Most of the 359 small business/farm insurance disputes in the period also related to insurers’ decisions, with another 12% based on service. Some 47% of the disputes related to commercial property claims and 25% to vehicle insurance.

Brokers were involved in 14% of the small business/farm disputes.

Domestic insurance disputes totalled 7065, with most centred around comprehensive motor cover (36%), home building (27%), home contents (12%) and travel insurance (9%).

Only 2% of the domestic issues involved brokers.

Mr Price says one area that is concerning FOS at present is the advertising of insurance products where no medical exam is required, but pre-existing medical conditions are excluded from cover.

He says customers could be easily confused, and there is a need for insurers to do something to make the exemption clearer.

“We find that issues like this can be easily rectified by speaking to the companies involved and ensuring that customer confusion is avoided,” he said. “There’s a certain tension between the marketing and underwriting of these products.”

Mr Tregillis says the early resolution of disputes continues to be a key focus for FOS, with 55% of all disputes during the reporting period closed within 60 days and 73% within 120 days.

“There is still much work to be done to improve how quickly we resolve disputes and this will be a key focus of our efforts over the coming year.”

“Fair and reasonable?” See ANALYSIS