David Locke, the chief ombudsman and CEO of the Australian Financial Complaints Authority (AFCA), has delved into the challenges facing the financial services industry in 2023.
In a speech to the AFCA Member Forum this month, Mr. Locke said 2023 is set to be another big year for AFCA as it transitions to a maturing EDR scheme to strengthen its place within the broader financial services industry and the Australian consumer protection network.
However, Locke expects AFCA members to face a myriad of changes this year, including increased scam activity.
“Addressing scams will not only be a significant investment of your time; it will require financial investment from all of us to find solutions that can minimise their impact,” he said.
Natural disasters and the ongoing impacts of flooding in Australia have also added pressure on the industry, particularly insurers facing delays and supply shortages caused by COVID-19 and the Ukraine-Russia issue. Moreover, millions of homeowners are expected to face higher mortgage rates when their fixed-term loans expire this year, impacting financial firms.
“This is why it is so critical that we all do what we can to proactively address these challenges to support each other and consumers,” Locke said.
One of the challenges facing the industry is the concerning number of complaints, with AFCA receiving over 60,000 complaints in this financial year.
“Current complaint volumes suggest that more work needs to be done,” Locke said. “We could reach up to 100,000 complaints by the end of the financial year.”
On average, AFCA receives over 7,500 monthly in the current financial year, up from 6,000 monthly complaints in the 2022 financial year and 5,800 a month in the 2021 financial year. Last month, AFCA revealed that it received over 2,000 complaints related to the devastating flood in the East Coast region.
“Initially, a large cohort of these complaints were insurance disputes. However, complaint volumes are now increasing across most product areas, with scams and unauthorised transactions putting pressure on banks and lenders,” Locke said. “If we look at general insurance complaints in FY23, complaints are up by 64% compared to the same period in FY22.”
The rising number of complaints, particularly around delays in insurance claims handling, has severely impacted AFCA's ability to resolve disputes efficiently, with delays in processing and allocating complaints across most product areas.
Locke said the following steps might reduce delays:
However, Locke emphasised that introducing these solutions comes at a cost not only to AFCA but also to its members. Therefore, he encouraged insurers to resolve more complaints within their dispute resolution process rather than relying on AFCA.
“We strongly encourage members to continue to invest in your own internal dispute resolution processes,” he said. “Members must explore ways to improve the resolution of complaints before they reach AFCA or in the early stages of our process.
“Early resolution is good for complainants and members and enables AFCA to prioritise complex or particularly urgent complaints – such as those relating to financial hardship and consumers severely impacted by natural disasters.”
