The Financial Ombudsman Service has showered the industry with praise following a reduction in general insurance disputes it has received – but brokerage complaints increased slightly, and the misleading advertising for sickness and accident cover is a growing concern.
In releasing the 2012/13 annual review of financial services, FOS reported that the number of general insurance disputes the body received fell by 9% from 2011/12 to 2012/13.
GI disputes at the FOS acceptance process remained unchanged – the majority relating to domestic insurance – however disputes against insurance brokers crept up from 112 to 195.
The main issues in disputes regarded home building insurance, home contents and comprehensive motor insurance.
John Price, lead ombudsman for general insurance, told Insurance Business that overall the figures suggest that the industry is handling the initial dispute process through their internal dispute resolution processes more efficiently.
“In our second stage, the dispute numbers have remained the same. I suspect that is due to the tail from the previous handling of disputes in previous years. Those disputes are still coming through FOS and I expect now and hope that we will see a reduction going forward.
“We can be reasonably confident in saying that the industry has worked very hard in improving its disputes handling procedures and processes.”
Addressing the rise in disputes against brokers, Price said it was nothing to worry about at this stage.
“Over the years we have seen fluctuations in the disputes against insurance brokers. We can’t make any conclusion from these figures that there is any particular change in those disputes. I would watch this space. If, over the next 12 months, we see a doubling of dispute numbers, we would want to know why that is occurring.”
FOS is casting a worrying eye over insurers advertising accident and health insurance. It is concerned about products that are advertised on the basis that no medical exam is required, yet also contain exclusions within the policy of pre-existing medical conditions.
The report said this could mislead customers and that FOS was considering whether it is sufficient to have the exclusions contained in the policy or if a warning needs to be provided at the time of advertising or when people make contact with the insurer.
“We would like the industry to look at this issue and be careful,” Price urged. “If they are going to advertise in that manner they should warn customers that pre-existing conditions may not be covered and warn the consumers that exclusions do apply.
However, overall FOS said the dispute figures were positive: Disputes over natural disaster dropped significantly. FOS received a total of 436 in 2012/2013 related to nine different disasters as far back as 2010 but it received 1,305 disputes relating to the November 2010 and January 2011 floods.
Price said the reduction was a result of the change in the definition of flood and a greater take up of flood cover.
FOS received just one dispute from the Tasmanian bushfires in January. Turning to the NSW blazes he hopes for a similar low figure.
“We hope that through the experience of FOS and the various community organisations and the insurance industry that most matters will be able to be dealt with efficiently and quickly and the level of dispute that arises will be minimal.”