Insurers support plans for a single ombudsman to handle financial and credit and investment disputes, provided a clear general insurance focus is maintained.

However, they have raised concerns over a proposed claims cap increase.

IAG says in a submission to the Government’s Ramsay review of external dispute resolution that  “years of work” will be undone if current processes are jeopardised.

The review’s interim report recommends replacing the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO) with a single scheme, and raising the $500,000 claims limit and $309,000 compensation cap.

FOS supports creation of the proposed new body, while the smaller CIO is against it.

IAG says FOS effectively handles insurance issues via a specialist stream.

“This has facilitated processes that complement the unique nature of general insurance products, including the implementation of a fast-track process to expedite small and low-value disputes – which include the majority of general insurance disputes,” it says.

The Insurance Council of Australia (ICA) says sharing of resources and back-office functions could improve efficiencies, but it cautions against higher claims and compensation limits.

“The procedures developed for dealing with small and relatively simple claims will not be appropriate for complex and high-value claims,” ICA says.

It warns a drastic increase in limits to at least $1 million would have implications for professional indemnity cover, and says more consultation is needed.

FOS has proposed ending the difference between claims limits and compensation caps, and supports raising the monetary ceiling to “future-proof the system”.

Chief Ombudsman Shane Tregillis says analysis undertaken with KPMG recommends a consumer claims limit of between $634,000 and $955,000.

“Ultimately, the Ramsay review panel will need to make final recommendations, but we support limits at the upper end of the recommended range,” he told insuranceNEWS.com.au.

“Given the nature and quantum of insurance claims, the changes to limits are not anticipated to have a major impact in insurance.”

Mr Tregillis says expertise across the range of disputes is important to FOS’ operations.

“In any future arrangements, we would aim to keep specialist expertise in insurance as part of an integrated whole,” he said.

The final report will be provided to Revenue and Financial Services Minister Kelly O’Dwyer by the end of next month.