AFCA Criticizes Insurance Industry Over Delayed Dispute Resolution
AFCA Criticizes Insurance Industry Over Delayed Dispute Resolution
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
The Australian Financial Complaints Authority (AFCA) has expressed its deep concern on the rising complaint numbers and poor industry response, leading to significant dispute resolution delays.
The CEO and Chief Ombudsman, David Locke, warned that complaint numbers could reach 100,000 in the current financial year, an increase from 72,358 in the previous year.
The surge in complaint numbers resulted from natural catastrophes, complaints about claims handling and an increase in banking sector-related scams.
The delayed resolution of complaints has resulted in significant frustration among policyholders, brokers, and other stakeholders. Insurance brokers have reported extensive delays, with one residential claim taking as long as nine months to be resolved. The issue has been ongoing for a while, with AFCA issuing an apology last year for the protracted delays. However, the problem has persisted.
AFCA is worried that the continuous rise in volumes of complaints – most notably delays in claim handling – will hamper its ability to resolve disputes promptly and efficiently. Thus, Mr. Locke advocates that firms focus on exploring ways to resolve complaints in the early stages of their process, or before they reach AFCA.
He notes that fewer complaints are being resolved after referral back to the financial firm, while more members are asking for extensions or not responding to complaints within the timeframes outlined. The Internal Dispute Resolution (IDR) is the first step, while External Dispute Resolution (EDR) was not designed to be "the only avenue for redress." Nevertheless, Mr. Locke insists that deep concern exists with firms not meeting their IDR and EDR obligations.
AFCA is undertaking several steps to tackle delayed dispute resolution, such as using technology solutions to expedite processing, reassigning staff to high-impact product areas, batching complaints and standardizing responses, and regularly updating complainants on the status of their complaint. However, these efforts will come at a cost to members.
AFCA's annual review for the year to June 30, 2022, noted that it takes an average of 72 days to close a complaint, but this statistic includes all complaints, not just those that go to determination. Around 3% of complaints take more than a year to resolve. The Insurance Council of Australia has acknowledged that the record flood event last year, which resulted in almost 240,000 claims, was an already stretched system of claims.
Finally, a lot more disputes have been resolved through internal dispute resolution processes, and the industry will pay close attention to the issues brought out through the external AFCA process. Therefore, the financial services industry needs to tackle the issue of delayed dispute resolution to ensure that complainants' expectations are met, customer satisfaction is guaranteed, and the industry's reputation remains solid.
Published:Monday, 20th Mar 2023 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
The Australian general insurance industry has reported an after-tax profit of $7.3 billion for the last financial year, marking its strongest performance in over a decade. This significant profit surge is attributed to lower-than-expected catastrophe losses and robust investment returns. However, this financial success has sparked public discourse regarding the fairness of pricing practices and the overall perception of the industry. - read more
The Australian Securities and Investments Commission (ASIC) has identified significant weaknesses in the claims handling practices of several insurers, raising concerns about potential compliance breaches. The regulator's recent review points to deficiencies in the oversight of expert reports and inadequate communication with consumers regarding cash settlement offers. - read more
After achieving a return on equity (ROE) of 19% in the last financial year-the highest in a decade-Australian general insurers are preparing for a moderation in earnings growth. Consultancy firm Finity projects that the industry's ROE will decrease by six percentage points to 13% in the current financial year, aligning with the target range of 10% to 15%. - read more
The Australian Amusement Leisure & Recreation Association (AALARA) has raised concerns over the escalating costs of public liability insurance, which are placing significant pressure on amusement and recreation operators across the country. This warning follows the Insurance Council of Australia's (ICA) recent call for reforms to civil liability laws. - read more
A recent report by the Australian Chamber of Commerce and Industry (ACCI) has revealed that small businesses in Australia are paying up to 30% more for their insurance premiums due to taxes and levies imposed by state and territory governments. This financial burden is leading to a worrying trend where an increasing number of small businesses are either underinsuring or forgoing insurance altogether. - read more
Welcome to a pivotal guide dedicated to empowering you with the essentials of income protection insurance in Australia. As we navigate through times of uncertainty, safeguarding your financial wellbeing becomes not just a priority, but a necessity. Income protection insurance stands as one of the key pillars of financial security, ensuring a steady flow of income during periods when you're unable to work due to illness or injury. - read more
Life insurance is a cornerstone of financial planning for Aussie families, offering protection and peace of mind. But what happens when the bustling flow of life brings changes? This is where a life insurance review comes into play. A life insurance review is a thorough analysis of your existing policy to ensure it aligns with your current life circumstances and financial goals. - read more
For many millennials, navigating the complexities of personal finance and future planning can feel like a bewildering journey. Among these financial responsibilities, life insurance emerges as a paramount consideration. More than just a safety net, life insurance can be the cornerstone of a sound financial strategy, providing peace of mind for both the policyholder and their loved ones. - read more
Life insurance is a crucial part of any comprehensive financial plan, providing peace of mind that your loved ones will be financially secure in the event of your passing. - read more
Life insurance is an essential safety net for families, providing financial security when it's needed the most. As your family grows, the importance of having a well-structured life insurance policy becomes even more critical. In the busy lives we lead today, it’s easy to overlook this crucial aspect of financial planning. However, ensuring your coverage meets your family's evolving needs is vital. - read more
Start Here !
Apply now for your free Insurance assessment and price comparisons!
Knowledgebase
Insurance: In law and economics, insurance is a form of risk management primarily used to hedge against the risk of potential financial loss.
