Fair and prompt insurance claim resolution falls under a financial service provider’s wider obligation to act with utmost good faith, the Financial Ombudsman Service (FOS) says.

The service’s latest circular contains insights on its approach to claims delays, with examples of two vehicle repair claims in which parts had to be ordered from abroad.

In one case FOS ruled against compensation because the insurer did not unreasonably delay a motorcycle repair that took more than a year. The repairer ordered the parts early in the claims process.

In the second case the service awarded compensation because the insurer had unreasonably delayed a car repair and did not make reasonable attempts to speed the process.

The repair job was given to the insurer’s authorised repairer without finding out if the policyholder’s preferred repairer or others could do it faster.

The vehicle was repaired poorly and the insured was given several estimated completion dates, although the insurer had no idea when the required part would arrive from overseas.

FOS says a general exclusion for failing to take reasonable precautions does not apply to negligence, and car insurance covers driver negligence.

This follows two determinations relating to people driving into water.

FOS says the insurer must demonstrate that the driver recognised the danger and then “courted the danger” or was “recklessly indifferent” to it.

In one case, the driver knew the road well. He had travelled it earlier but on returning came around a bend and found himself in water that swept his car sideways.

FOS found the driver had no opportunity to recognise the danger.

In the second determination, a driver went along a flooded road believing the water was not deep.

FOS found the driver had not recognised the danger and had taken precautions he believed were appropriate to a wet road.

It supported the exclusion in a third case involving “an unsavoury interaction” between an insured and a third-party driver.

The insured recognised the third party was unpredictable, unreliable and potentially dangerous but chose to drive so close that a collision resulted when the third party braked.

FOS says the insured was aware of the danger and courted it.

Chief Ombudsman Shane Tregillis says the service has eliminated dispute backlog queues in its case management area and will streamline its processes further this year.