How AFCA addresses motor vehicle total loss complaints

The Australian Financial Complaints Authority (AFCA) delved into common issues and complaint types and how the complaints authority solves disputes.

In a new document on its approach to motor vehicle total loss complaints, AFCA revealed how it investigates and resolves motor vehicle disputes – particularly whether a vehicle must be treated as a total loss – by determining if the insurer's decision is fair, factors to consider, information needed to solve the dispute, and case studies.

The document is intended to help:

• general insurance providers;
• consumers and consumer representatives with complaints involving a vehicle's extent of damage; and
• individuals who want to understand how AFCA approaches issues and complaints.

AFCA's jurisdiction

AFCA makes decisions on motor vehicle total loss complaints when they are not resolved by agreement, negotiation, or conciliation. It also assesses the conduct of the financial company involved in the dispute based on the law, codes, and standards of industry practice.

“Our decision reflects what is fair in all the circumstances having regard to legal principles, applicable industry codes or guidance, good industry practice, and previous decisions of AFCA or predecessor schemes,” AFCA said in the document.

AFCA may decide that a financial firm must compensate a consumer, whether for direct financial loss, financial loss, or non-financial loss.

“We may also decide that a financial firm is required to take, or refrain from taking, particular actions,” AFCA said. “If a consumer accepts our decision, the financial firm is bound by that decision.”

Is the insurer's decision fair?

AFCA receives complaints when the consumer (complainant) and the insurer disagree about whether a vehicle should be considered a total loss or should be written-off.

When assessing complaints, AFCA will consider if the insurance provider has exercised its discretion under the policy fairly. It will also consider the following factors:

• if the vehicle is economical to repair;
• relevant legislation that determines when a vehicle is a total loss ;
• if the vehicle will be safe after repair;
• if the vehicle should be repaired or written-off.

If AFCA remained unsatisfied with the insurer's decision, it will provide a different solution, including deciding whether the vehicle should be repaired or written off, or ordering the insurer to pay for compensation for non-financial loss.