Insurers and underwriters declined 46% more claims during 2010/11 than they did in 2011/12 partly due to the rise in personal insurance claims.
Code participants of the Financial Ombudsman Service declined 97,118 claims in 2011/12, according to the annual report. The year before, participants declined 66,296 claims.
Insurers attributed the rejected claim numbers to the 2010/11 Queensland floods, stating some claims were not declined until the 2011/12 reporting year due to the complexity of the investigations. They also cited claims emanating from damage or loss generated by extreme weather events during 2011/12, and the continued refinement of their data recording and reporting systems.
However FOS said the figures warranted a closer look. “The increase in declined claims however, is significant and in our view requires further assessment by industry.”
It said the declined claims in 2009/10 and 2010/11 were 67,724 and 66,296 respectively.
If the data in this reporting year can in part be explained by the scale and impact of the natural disasters that occurred during 2010/2011 and 2011/2012, FOS said it would expect to see a corresponding decrease in declined claims in 2012/2013. But’s analysis has revealed that the declined claims data being reported to FOS may include partially accepted claims data and withdrawn claims data, reducing its ability to identify annual trends.
“We encourage code participants to review their internal processes to ensure they can differentiate claims data into three categories: declined claims, partially accepted claims and withdrawn claims,” FOS urged. “As highlighted by ASIC34, the ability to differentiate data in this way will enhance analysis and assist code participants and FOS to more readily identify emerging trends in declined claim rates.”
FOS’ data also revealed that the number of personal lines disputes insurers and underwriters received from customers jumped 26% to 27,240 between 2011/12 compared to 2010/11 thanks to customers’ heightened awareness of internal complaints handling procedures; and additional data sourced from new code participants (other insurers and underwriters).
Among the personal lines classes that saw the biggest increase are home buildings and contents combined and home contents which rose 59% and personal motor which grew by 38%.
Internal disputes in travel, and personal and domestic property fell 27% and 24% respectively.
Code participants received 6% fewer internal disputes over commercial insurance claims, with just 1,635. Business claims resulted in the largest number of internal disputes, down from 17% in 2010/11. But internal disputes in liability rose by 69%, followed by builders warranty which saw an increase of 52%, commercial motor at 30% and farm at 21%.
But overall, 71% of internal disputes were in favour of the code participant and 29% in favour of the consumer.