The coronavirus pandemic has hit many industries hard – but for the insurance sector, it has created a myriad of questions and uncertainty over obligations to policyholders and claims payouts.
Now, the Australia Securities and Investments Commission (ASIC) has attempted to make the picture a little clearer by writing directly to general and life insurers. In its letters, it states that it expects insurers to handle insurance claims with the utmost good faith – and that complaints should be dealt with genuinely, fairly, promptly and consistently.
“As a starting point, ASIC expects insurers to consider their conduct in light of the current circumstances and to act in a fair, professional manner that is in line with the duty of utmost good faith,” it states in the letter to general insurers attributed to Emma Curtis, senior executive leader – insurers.
“Now more than ever, it is important that general insurers stand by the commitments made in the 2020 General Insurance Code of Practice (the 2020 Code): to provide value, transparency and fairness; and promote trust, integrity and respect. While we recognise that ICA members and other code participants are transitioning to comply with the new commitments by January 01, 2021, now is a time when many more, if not most, of the general insurance industry’s customers are in a vulnerable position and may be suffering financial hardship and require additional support. Therefore, a commitment to meet the additional consumer protections contained in the 2020 Code, particularly those related to vulnerability and financial hardship, is important at this time.”
It goes on to suggest that insurers should be flexible when dealing with the specific circumstances of their customers – and where they are no longer able to pay premiums due to reduced income, it is up to insurers to help them maintain their coverage. It suggests that possible solutions might include deferrals, premium holidays or reductions for a reasonable period.
“Insurers should not automatically cancel or lapse policies for non-payment of premiums but continue cover for those policies for a reasonable period of time, while working through further options that may be available for the consumer to retain their cover,” it states in the letter to general insurers.
“ASIC also expects insurers to consider whether outcomes will be fair for consumers if they have to actively ‘opt in’ or make a request in order to receive any benefit insurers offer in response to the Covid pandemic. For example, consumers who are struggling to pay their insurance premiums may simply allow the policy to lapse rather than contact their insurer to cancel it. If an insurer relies on consumers to contact them to discuss options for retaining their cover, this can result in inconsistent and unfair outcomes for policyholders. Vulnerable consumers will be under considerable stress and would benefit if the insurer automatically extends the cover and undertakes proactive contact with the consumer, without the need for any action by the consumer. Insurers should consider the needs and vulnerability of their consumers when deciding whether to offer renewed cover or when making changes to policy terms and price.
“Whilst we recognise that insurers need to manage their exposure to risk, we ask insurers to act flexibly to ensure that changes are fair to consumers, taking into account the individual circumstances. For example, consumers currently overseas with travel insurance cover who are delayed or unable to return to Australia will be particularly vulnerable. Insurers should be cognisant of this when considering requests to extend travel insurance taken out prior to the known event. We would welcome the opportunity to discuss further approaches to support Australian policyholders who are currently suffering hardship and financial distress, including any consideration that insurers have given to reducing or refunding premiums on policies where the risk of loss has fallen significantly as a result of the Covid pandemic. This would include, for example, travel insurance for future travel that can no longer be undertaken, and motor vehicle insurance where the motor vehicle is being used much less.”
In addition, it outlines its expectations for insurers to proactively communicate with policyholders in clear language – and to recognise this rapidly changing situation.
“ASIC expects insurers to encourage consumers to lodge their claims, so that it can be fairly and thoroughly assessed,” it states. “Insurers should be flexible in their treatment of consumers whose personal and/or working conditions have changed as a result of the Covid pandemic. We expect that a consumer’s ability to make a claim or have their claim handled in a timely manner, should not be affected by insurer requirements which conflict with Government requirements or recommendations in place because of the Covid pandemic.”
It lists a number of expectations for insurers on this theme, as follows:
- To “not deny claims solely because a consumer’s circumstances change because of the Covid pandemic and they do not notify the insurer. Examples include changes to working arrangements or the usage of a motor vehicle due to the Covid pandemic;
- Take reasonable steps to manage claims efficiently and effectively within best practice timeframes, noting the constraints of ‘social distancing’ and staff working from home;
- Take all practical steps to source repairers and parts to help ensure that property and motor vehicle repairs are not avoidably delayed by travel restrictions;
- Waive or alter requirements that are impractical due to the effects of the Covid pandemic. For example, requirements that consumers attend face-to-face interviews for motor claims under investigation; and
- Not refuse to assess or pay claims because the consumer is unable to pay the excess up front rather than have it deducted from the claim settlement. This practice would disadvantage consumers who are experiencing financial difficulty.”
It states that any new Covid-related exclusions should be clearly disclosed and concludes by stating that while it does not currently intend to seek data on claims over the coming months it does envisage “seeking data as the operational impact of the pandemic subsides. Insurers should, at a minimum, identify claims under a general insurance product where the loss event is connected to the effects of the Covid Pandemic. We will engage with the ICA and insurers shortly to discuss our likely data requirements.”