ASIC uncovers insurance claims handling weaknesses

The Australian Securities and Investments Commission (ASIC) has called on general insurers to improve their insurance claims handling practices after a recent review unearthed weaknesses.

ASIC's investigation of home insurance claims found issues across five key areas, including communication, oversight, complaint recognition, vulnerable customer treatment and resourcing.

ASIC home insurance review finds claims handling weaknesses

ASIC’s review, Report 768 Navigating the storm: ASIC's review of home insurance claims (REP 768), assessed the claims handling practices of general insurers, which are required to “manage claims efficiently, honestly, and fairly”, from January 2022.

REP 768 analysed data from over 218,000 home insurance claims lodged between January and March 2022 from six insurers that cover 63% of the Australian home insurance market. Among the claims, 43% were related to severe weather events, including the devastating floods in New South Wales and Queensland in February and March 2022.

ASIC outlines five areas for insurance claims handling improvement

The review outlined five areas of improvement:

• communication with consumers about decisions, delays, and complications;
• project management and oversight of third parties;
• recognition of, and response to, consumer complaints;
• identification and treatment of vulnerable customers; and
• resourcing of claims handling and dispute resolution functions.

“An insurance claim doesn't have to be handled perfectly, but it must be handled well,” said ASIC deputy chair Karen Chester. “Our claims handling review found good practices and poor practices across all six insurers.

“We identified five areas where insurers can and should make immediate claims handling improvements – consumer communications, project management, identifying vulnerable consumers and complaints, resourcing of claims, and complaints handling.”

All five areas are “within insurers’ control”, according to the regulator.

“Improving claims handling practices and resourcing will make an immediate and positive difference to consumers when it matters most – making a claim on their home insurance,” Chester said.

ASIC is expected to contact the six general insurers to detail individual areas of improvement.

Also this month, the corporate regulator warned the financial services industry that it will take “strong, targeted enforcement action” against market misconduct after nearly $110 million in penalties were levelled firms under its remit in the first half of 2023.

Do you have a view on the five key areas for insurance claims handling improvement identified by ASIC? Leave a comment below.