"Decisive action" needs to be taken across the insurance industry to address consumer concerns about their treatment during the claims process, The Financial Rights Legal Centre has said.
In a new report published by the community legal centre, called Guilty until proven innocent: Insurance investigations in Australia
, there are “serious concerns about tactics used by general insurance companies in claims handling and assessment.”
Alexandra Kelly, Financial Rights principal solicitor, said that “decisive action” needs to be taken to address public concern.
“Decisive action needs to be taken by the entire insurance industry to address the public’s legitimate concerns over their treatment in claims handling and investigations,” Kelly said.
“At a minimum the general insurance industry needs to establish a set of good practice standards for investigations under its Code of Practice.
“In life insurance, a strong and effective Code of Practice addressing consumer concerns and registered by ASIC
needs to be introduced.”
While the scandal surrounding CommInsure is the “the tip of the iceberg when it comes to claims handling abuses in the insurance industry,” the report details the trials faced by 40 consumers subject to investigations.
“We regularly hear of consumers being threatened with the rejection of their claim or other outrageous conduct such as having their relatives reported to immigration,” Kelly continued.
“Many of our clients feel than they have been subject to racial profiling and others with poor English skills have not had access to appropriate translators. Consumers are also subject to incredibly long interviews – sometimes over five hours in length.
“Our clients routinely feel bullied, harassed and intimidated by investigators and often describe being treated like criminals.”
The report found that the average investigation and dispute time was 18 months as others took over three years to conclude, forcing customers to abandon their claims, Kelly said.
In the end the investigation process is so onerous that many simply withdraw their claim – not because of any admission of fraudulent behaviour but because the process is too burdensome or invasive for many consumers to bear.
“What we see though when insurer’s allegations of fraud are actually put to the test by the industry referee is that that the vast majority are simply unfounded.”
The report lays out 14 recommendations to help improve the investigation process including an industry established set of best practice standards for investigations, the development of a specific guide for interviewing vulnerable consumers, and ongoing diversity and anti-discrimination training for investigative staff.
Kelly admitted that fraud may still be an issue for the insurance industry but practices have to change.
“The industry regularly throws around a $2.1 billion annual insurance fraud figure but it turns out that this is based on a 20-year-old estimated percentage of claims insurers ‘believed to be fraudulent’ rather than on any proven fraudulent claim data,” Kelly said.
“We of course are not saying that fraud doesn’t exist. It does. However it is this type of exaggerated rhetoric that builds a ‘guilty before proven innocent’ culture and ultimately helps justify the industry’s poor treatment of policyholders.”