The corporate regulator has warned legitimate car insurance claims are being withdrawn due to hostile claims investigation practices.

A damning report by the Australian Securities and Investments Commission (ASIC) says claims investigation practices have left an overwhelming number of vehicle owners feeling they were treated like criminals.

ASIC’s research found that if a claim took longer than 31 days to complete, the proportion of withdrawn claims blew out from 10% to 21%.

When it took longer than 360 days, 36% were withdrawn.

“Many consumers who persevered through an investigation said they did so because they could not financially afford to withdraw their claim,” the report says.

Many consumers felt disempowered at every stage of the claims process. Investigators conducted interviews at insureds’ homes and acted like police interrogators – interviewing family members in separate rooms, challenging answers and repeating questions to catch inconsistencies.

They required unnecessary and exhausting amounts of information, the report says.

One insurer wanted phone records with annotated explanations for each call, and a list of personal details of friends and family.

“Insurers have a legitimate need to investigate and decline fraudulent claims,” ASIC says. “But the harmful investigation practices we identified are inconsistent with a fair process for investigating claims.”

The regulator says investigation standards in the General Insurance Code of Practice, proposed by the Insurance Council of Australia (ICA), do not go far enough.

The Financial Rights Legal Centre’s Director of Casework Alexandra Kelly says the report confirms the experiences of clients.

“We regularly hear from consumers subjected to threats, bullying behaviour and harassment by unregulated insurance investigators,” she said.

“Consumers endure incredibly long interviews – sometimes over five hours – and routinely describe being treated like criminals, and many with poor English skills are not given access to appropriate translators.”

ICA spokesman Campbell Fuller told insuranceNEWS.com.au: “Insurers believe most investigations are conducted fairly and transparently, but ICA acknowledges a small number of consumers should have received better customer service.”