Claims going to external dispute resolution are rising strongly, General Insurance Ombudsman John Price told last week’s Regulatory Update conference in Sydney.

Mr Price said some in the industry are reporting a 20-25% increase, although there has been no corresponding increase in claims declined or going to internal dispute resolution.

In 2011 FOS saw a 30% increase in disputed claims, or 15% excluding flood claims.

It saw a 47% increase in disputes that reached its decision-making level, where the parties could not resolve the issue between them, or a 22% increase excluding flood claims.

Mr Price said the figures might reflect increased awareness of dispute mechanisms.

He noted claims and disputes for the 2010/11 financial year varied little from 2009/10.

In 2010/11, 37 million general insurance policies were issued and 3.8 million claims made, of which around 2% or 66,296 claims were denied.

In 2009/10, 3.8 million claims were made, many resulting from Melbourne and Perth storms, and the dispute and outcome figures were roughly the same as 2010/11.

But he said the categories changed, with 51% of declined claims in 2009/10 related to motor vehicles and 33% to home building/contents.

In 2010/11 buildings and contents were 38% of declined claims and motor vehicle 45%, probably due to last year’s natural disasters.

Mr Price said the figures indicate the industry performed well but they do not tell the whole story.

There were 55,000 claims from the Victorian and Queensland floods and FOS received over 1200 disputes, almost 2% of claims lodged.

“That is significantly greater than any other natural disaster,” he said.

Other events produced disputes from between 0.1% and 0.5% of claims.

Mr Price said the floods showed consumers were not clearly informed and that they were confused.

Salespeople had told consumers the policy covered flood when clearly it didn’t, or that it was the best available or provided all the cover the consumer needed.

“Is the aim of these salespeople to sell the product and underwrite later, or is it in fact to properly inform people as to the extent of cover? It’s a concern.”

He said the lessons of 2011 are increased awareness and the need for improved document exchange, communication and transparency.

Mr Price said consumers should not need a lawyer to access FOS but after the Queensland floods groups such as Legal Aid provided information and “flushed out” issues.

Consumer Action Law Centre co-CEO Catriona Lowe said people should not require a lawyer, but often needed someone to advocate for them and help them keep going through a difficult process.

“Consumers become worn down by the process,” she said.