The Australian Securities and Investments Commission (ASIC) has sent a warning that firms must handle claims fairly after the Federal Court last week ruled Youi breached utmost good faith requirements under the Insurance Contracts Act on five occasions.

ASIC launched the action against Youi earlier this year over its handling of a Broken Hill hailstorm claim that was the subject of a Hayne royal commission case study.

“The value of an insurance policy is in the promise, so that a consumer can feel confident and secure that they will be looked after when something goes wrong,” ASIC Commissioner Sean Hughes said.

“The community expects their insurer to be there when something does go wrong, to be treated fairly and with dignity and respect.”

The Insurance Contracts Act didn’t impose monetary penalties at the time of the Broken Hill claim dispute, but that has changed for offences taking place since March 13 last year.

The Federal Government has this month also introduced legislation into Parliament that makes claims handling a financial service, bringing it under Corporations Act obligations to act efficiently, honestly and fairly.

The Broken Hill claim examined by the Federal Court was lodged in January 2017 after a hailstorm caused extensive damage to the policyholder’s property. After continual delays, repairs were not completed until some 22 months later.

Chief Justice James Allsop says the insurer failed to act with utmost good faith in relation to the property repairs and in responding to policyholder complaints and Youi failed to exhibit “decency and fairness”.

Youi says it acknowledges its response to the claim was inadequate and accepts the Federal Court judgment. The insurer has since reviewed its service provider network and the management of repair quality, and has improved temporary accommodation and customer complaints processes.

“Youi has made significant changes to the way claims are managed to ensure repairs occur in a timely manner and all customers consistently receive outstanding service,” a spokeswoman told insuranceNEWS.com.au.